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THIRD DIVISION In the meantime, petitioner filed an action for reversion of donation against the City of Cebu docketed

as Civil Case No. 238-BC before Branch 7 of the then Court of First Instance of Cebu. On May 7,
PROVINCE OF CEBU, G.R. No. 170115
Petitioner, 1974, petitioner and the City of Cebu entered into a compromise agreement which the court
Vs. approved on July 17, 1974.[8] The agreement provided for the return of the donated lots to petitioner
HEIRS OF RUFINA MORALES,
except those that have already been utilized by the City of Cebu. Pursuant thereto, Lot No. 646-A-3
NAMELY: FELOMINA V. PANOPIO,
NENITA VILLANUEVA, ERLINDA V. was returned to petitioner and registered in its name under TCT No. 104310.[9]
ADRIANO and CATALINA V. QUESADA, Morales died on February 20, 1969 during the pendency of Civil Case No. 238-BC.[10] Apart
Respondents. Promulgated:
from the deposit and down payment, she was not able to make any other payments on the balance
February 19, 2008
of the purchase price for the lot.
DECISION
On March 11, 1983, one of the nieces of Morales, respondent Catalina V. Quesada, wrote

YNARES-SANTIAGO, J.: to then Cebu Governor Eduardo R. Gullas asking for the formal conveyance of Lot No. 646-A-3 to

Morales surviving heirs, in accordance with the award earlier made by the City of Cebu.[11] This was
This is a petition for review on certiorari of the Decision[1] of the Court of Appeals dated March 29,
followed by another letter of the same tenor dated October 10, 1986 addressed to Governor
2005 in CA-G.R. CV No. 53632, which affirmed in toto the Decision[2] of
Osmundo G. Rama.[12]
the Regional Trial Court of CebuCity, Branch 6, in Civil Case No. CEB-11140 for specific performance 1
and reconveyance of property. Also assailed is the Resolution[3] dated August 31, 2005 denying the The requests remained unheeded thus, Quesada, together with the other nieces of Morales

motion for reconsideration. namely, respondents Nenita Villanueva and Erlinda V. Adriano, as well as Morales sister, Felomina V.

Panopio, filed an action for specific performance and reconveyance of property against petitioner,
On September 27, 1961, petitioner Province of Cebu leased[4] in favor of Rufina Morales a 210-square
which was docketed as Civil Case No. CEB-11140 before Branch 6 of
meter lot which formed part of Lot No. 646-A of the Banilad Estate. Subsequently or sometime in
the Regional Trial Court of Cebu City.[13] They also consigned with the court the amount of
1964, petitioner donated several parcels of land to the City of Cebu. Among those donated
P13,450.00 representing the balance of the purchase price which petitioner allegedly refused to
was Lot No. 646-A which the City of Cebu divided into sub-lots. The area occupied by Morales was
accept.[14]
thereafter denominated as Lot No. 646-A-3, for which Transfer Certificate of Title (TCT) No.

30883[5] was issued in favor of the City of Cebu. Panopio died shortly after the complaint was filed.[15]

On July 19, 1965, the city sold Lot No. 646-A-3 as well as the other donated lots at public auction in Respondents averred that the award at public auction of the lot to Morales was a valid and binding

order to raise money for infrastructure projects. The highest bidder for Lot No. 646-A-3 was Hever contract entered into by the City of Cebu and that the lot was inadvertently returned to petitioner

Bascon but Morales was allowed to match the highest bid since she had a preferential right to the under the compromise judgment in Civil Case No. 238-BC. They alleged that they could not pay the

lot as actual occupant thereof.[6] Morales thus paid the required deposit and partial payment for the balance of the purchase price during the pendency of said case due to confusion as to whom and

lot.[7] where payment should be made. They thus prayed that judgment be rendered ordering petitioner
FINDING THAT RUFINA MORALES AND RESPONDENTS, AS HER HEIRS, HAVE THE
to execute a final deed of absolute sale in their favor, and that TCT No. 104310 in the name of RIGHT TO EQUAL THE BID OF THE HIGHEST BIDDER OF THE SUBJECT PROPERTY
petitioner be cancelled.[16] AS LESSEES THEREOF;

Petitioner filed its answer but failed to present evidence despite several opportunities given thus, it FINDING THAT WITH THE DEPOSIT AND PARTIAL PAYMENT MADE BY RUFINA
was deemed to have waived its right to present evidence.[17] MORALES, THE SALE WAS IN EFFECT CLOSED FOR ALL LEGAL PURPOSES, AND
THAT THE TRANSACTION WAS PERFECTED AND CONSUMMATED;
On March 6, 1996, the trial court rendered judgment, the dispositive part of which reads:
WHEREFORE, judgment is rendered in favor of the plaintiffs and against FINDING THAT LACHES AND/OR PRESCRIPTION ARE NOT APPLICABLE AGAINST
the defendant Province of Cebu, hereby directing the latter to convey Lot 646-A-3 RESPONDENTS;
to the plaintiffs as heirs of Rufina Morales, and in this connection, to execute the
necessary deed in favor of said plaintiffs.
FINDING THAT DUE TO THE PENDENCY OF CIVIL CASE NO. 238-BC, PLAINTIFFS
WERE NOT ABLE TO PAY THE AGREED INSTALLMENTS;
No pronouncement as to costs.
AFFIRMING THE DECISION OF THE TRIAL COURT IN FAVOR OF THE
SO ORDERED.[18] RESPONDENTS AND AGAINST THE PETITIONERS.[20]

In ruling for the respondents, the trial court held thus:


[T]he Court is convinced that there was already a consummated sale between the
City of Cebu and Rufina Morales. There was the offer to sell in that public auction The petition lacks merit.
sale. It was accepted by Rufina Morales with her bid and was granted the award
The appellate court correctly ruled that petitioner, as successor-in-interest of the City of Cebu, is
for which she paid the agreed downpayment. It cannot be gainsaid that at that 2
time the owner of the property was the City of Cebu. It has the absolute right to bound to respect the contract of sale entered into by the latter pertaining to Lot No. 646-A-3. The
dispose of it thru that public auction sale. The donation by the defendant Province
of Cebu to Cebu City was not voided in that Civil Case No. 238-BC. The compromise City of Cebuwas the owner of the lot when it awarded the same to respondents predecessor-in-
agreement between the parties therein on the basis of which judgment was
interest, Morales, who later became its owner before the same was erroneously returned to petitioner
rendered did not provide nullification of the sales or disposition made by the City
of Cebu. Being virtually successor-in-interest of City of Cebu, the defendant is under the compromise judgment. The award is tantamount to a perfected contract of sale between
bound by the contract lawfully entered into by the former. Defendant did not
initiate any move to invalidate the sale for one reason or another. Hence, it stands Morales and the City of Cebu, while partial payment of the purchase price and actual occupation of
as a perfectly valid contract which defendant must respect. Rufina Morales had a
the property by Morales and respondents effectively transferred ownership of the lot to the
vested right over the property. The plaintiffs being the heirs or successors-in-
interest of Rufina Morales, have the right to ask for the conveyance of the property latter. This is true notwithstanding the failure of Morales and respondents to pay the balance of the
to them. While it may be true that the title of the property still remained in the
name of the City of Cebu until full payment is made, and this could be the reason purchase price.
why the lot in question was among those reverted to the Province, the sellers
obligation under the contract was, for all legal purposes, transferred to, and Petitioner can no longer assail the award of the lot to Morales on the ground that she had no right
assumed by, the defendant Province of Cebu. It is then bound by such contract. [19]
to match the highest bid during the public auction. Whether Morales, as actual occupant and/or
Petitioner appealed to the Court of Appeals which affirmed the decision of the trial court in toto. Upon lessee of the lot, was qualified and had the right to match the highest bid is a foregone matter that
denial of its motion for reconsideration, petitioner filed the instant petition under Rule 45 of the Rules could have been questioned when the award was made. When the City of Cebu awarded the lot to
of Court, alleging that the appellate court erred in: Morales, it is assumed that she met all qualifications to match the highest bid. The subject lot was

auctioned in 1965 or more than four decades ago and was never questioned. Thus, it is safe to
assume, as the appellate court did, that all requirements for a valid public auction sale were complied of the vendor to either demand specific performance or rescission of the contract of sale.[25] It did

with. not abolish the contract of sale or result in its automatic invalidation.

A sale by public auction is perfected when the auctioneer announces its perfection by the As correctly found by the appellate court, the contract of sale between the City of Cebu and

fall of the hammer or in other customary manner.[21] It does not matter that Morales merely matched Morales was also partially consummated. The latter had paid the deposit and downpayment for the

the bid of the highest bidder at the said auction sale. The contract of sale was nevertheless perfected lot in accordance with the terms of the bid award. She first occupied the property as a lessee in

as to Morales, since she merely stepped into the shoes of the highest bidder. 1961, built a house thereon and was continuously in possession of the lot as its owner until her death

Consequently, there was a meeting of minds between the City of Cebu and Morales as to in 1969. Respondents, on the other hand, who are all surviving heirs of Morales, likewise occupied

the lot sold and its price, such that each party could reciprocally demand performance of the contract the property during the latters lifetime and continue to reside on the property to this day.[26]

from the other.[22] A contract of sale is a consensual contract and is perfected at the moment there The stages of a contract of sale are as follows: (1) negotiation, covering the period from

is a meeting of minds upon the thing which is the object of the contract and upon the price. From the time the prospective contracting parties indicate interest in the contract to the time the contract

that moment, the parties may reciprocally demand performance subject to the provisions of the law is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the

governing the form of contracts. The elements of a valid contract of sale under Article 1458 of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the

Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price price; and (3) consummation, which begins when the parties perform their respective undertakings

certain in money or its equivalent.[23] All these elements were present in the transaction between the under the contract of sale, culminating in the extinguishment thereof.[27] In this case, respondents
3
City of Cebu and Morales. predecessor had undoubtedly commenced performing her obligation by making a down payment on

There is no merit in petitioners assertion that there was no perfected contract of sale the purchase price. Unfortunately, however, she was not able to complete the payments due to legal

because no Contract of Purchase and Sale was ever executed by the parties. As previously stated, a complications between petitioner and the city.

contract of sale is a consensual contract that is perfected upon a meeting of minds as to the object Thus, the City of Cebu could no longer dispose of the lot in question when it was included

of the contract and its price. Subject to the provisions of the Statute of Frauds, a formal document as among those returned to petitioner pursuant to the compromise agreement in Civil Case No. 238-

is not necessary for the sale transaction to acquire binding effect. [24] For as long as the essential BC. The City of Cebu had sold the property to Morales even though there remained a balance on the

elements of a contract of sale are proved to exist in a given transaction, the contract is deemed purchase price and a formal contract of sale had yet to be executed. Incidentally, the failure of

perfected regardless of the absence of a formal deed evidencing the same. respondents to pay the balance on the purchase price and the non-execution of a formal agreement

Similarly, petitioner erroneously contends that the failure of Morales to pay the balance of was sufficiently explained by the fact that the trial court, in Civil Case No. 238-BC, issued a writ of

the purchase price is evidence that there was really no contract of sale over the lot between Morales preliminary injunction enjoining the city from further disposing the donated lots. According to

and the City of Cebu. On the contrary, the fact that there was an agreed price for the lot proves that respondents, there was confusion as to the circumstances of payment considering that both the city

a contract of sale was indeed perfected between the parties. Failure to pay the balance of the and petitioner had refused to accept payment by virtue of the injunction. [28] It appears that the

purchase price did not render the sale inexistent or invalid, but merely gave rise to a right in favor parties simply mistook Lot 646-A-3 as among those not yet sold by the city.
The City of Cebu was no longer the owner of Lot 646-A-3 when it ceded the same to Finally, petitioner cannot raise the issue of prescription and laches at this stage of the

petitioner under the compromise agreement in Civil Case No. 238-BC. At that time, the city merely proceedings. Contrary to petitioners assignment of errors, the appellate court made no findings on
retained rights as an unpaid seller but had effectively transferred ownership of the lot to Morales. As the issue because petitioner never raised the matter of prescription and laches either before the trial

successor-in-interest of the city, petitioner could only acquire rights that its predecessor had over court or Court of Appeals. It is basic that defenses and issues not raised below cannot be considered

the lot. These rights include the right to seek rescission or fulfillment of the terms of the contract on appeal.[31] Thus, petitioner cannot plead the matter for the first time before this Court.

and the right to damages in either case.[29] WHEREFORE, in view of the foregoing, the petition is hereby DENIED and the decision and

In this regard, the records show that respondent Quesada wrote to then Cebu Governor resolution of the Court of Appeals in CA-G.R. CV No. 53632 are AFFIRMED.

Eduardo R. Gullas on March 11, 1983, asking for the formal conveyance of Lot 646-A-3 pursuant to SO ORDERED.
the award and sale earlier made by the City of Cebu. On October 10, 1986, she again wrote to

Governor Osmundo G. Rama reiterating her previous request. This means that petitioner had known,

at least as far back as 1983, that the city sold the lot to respondents predecessor and that the latter

had paid the deposit and the required down payment. Despite this knowledge, however, petitioner

did not avail of any rightful recourse to resolve the matter.

Article 1592 of the Civil Code pertinently provides:


4
Article 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission
of the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the contract has
been made upon him either judicially or by notarial act. After the demand, the
court may not grant him a new term. (Underscoring supplied)

Thus, respondents could still tender payment of the full purchase price as no demand for rescission

had been made upon them, either judicially or through notarial act. While it is true that it took a long

time for respondents to bring suit for specific performance and consign the balance of the purchase

price, it is equally true that petitioner or its predecessor did not take any action to have the contract

of sale rescinded. Article 1592 allows the vendee to pay as long as no demand for rescission has

been made.[30] The consignation of the balance of the purchase price before the trial court thus
operated as full payment, which resulted in the extinguishment of respondents obligation under the

contract of sale.
G.R. No. L-25494 June 14, 1972 The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A
NICOLAS SANCHEZ, plaintiff-appellee, is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so
vs. understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument.
SEVERINA RIGOS, defendant-appellant. Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the
land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate
CONCEPCION, C.J.:p
that her aforementioned agreement, promise and undertaking is supported by a consideration
"distinct from the price" stipulated for the sale of the land.
Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said
certified the case to Us, upon the ground that it involves a question purely of law. consideration, and this would seem to be the main factor that influenced its decision in plaintiff's
The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos favor. It should be noted, however, that:
executed an instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and (1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers
committed ... to sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell."
Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in In other words, Article 1479 is controlling in the case at bar.
Transfer Certificate of Title No. NT-12528 of said province, within two (2) years from said date with
(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires
the understanding that said option shall be deemed "terminated and elapsed," if "Sanchez shall fail
the concurrence of a condition, namely, that the promise be "supported by a consideration distinct
to exercise his right to buy the property" within the stipulated period. Inasmuch as several tenders
from the price." Accordingly, the promisee can not compel the promisor to comply with the promise,
of payment of the sum of Pl,510.00, made by Sanchez within said period, were rejected by Mrs.
unless the former establishes the existence of said distinct consideration. In other words,
Rigos, on March 12, 1963, the former deposited said amount with the Court of First Instance of
the promisee has the burden of proving such consideration. Plaintiff herein has not even alleged the
Nueva Ecija and commenced against the latter the present action, for specific performance and
existence thereof in his complaint.
damages.
(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special
After the filing of defendant's answer — admitting some allegations of the complaint, denying other
defense, the absence of said consideration for her promise to sell and, by joining in the petition for
allegations thereof, and alleging, as special defense, that the contract between the parties "is a
a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in
unilateral promise to sell, and the same being unsupported by any valuable consideration, by force
defendant's answer. Indeed as early as March 14, 1908, it had been held, in Bauermann v. 5
of the New Civil Code, is null and void" — on February 11, 1964, both parties, assisted by their
Casas,3 that:
respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28,
1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum One who prays for judgment on the pleadings without offering proof as to the
judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos truth of his own allegations, and without giving the opposing party an opportunity
was, likewise, sentenced to pay P200.00, as attorney's fees, and other costs. Hence, this appeal by to introduce evidence, must be understood to admit the truth of all the material
Mrs. Rigos. and relevant allegations of the opposing party, and to rest his motion for judgment
on those allegations taken together with such of his own as are admitted in the
This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which
pleadings. (La Yebana Company vs. Sevilla, 9 Phil. 210). (Emphasis supplied.)
provides:
This view was reiterated in Evangelista v. De la Rosa4 and Mercy's Incorporated v. Herminia Verde.5
ART. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. ,6 from which
We quote:
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a consideration The main contention of appellant is that the option granted to appellee to sell to
distinct from the price. it barge No. 10 for the sum of P30,000 under the terms stated above has no legal
effect because it is not supported by any consideration and in support thereof it
In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed
invokes article 1479 of the new Civil Code. The article provides:
and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the
option, copy of which was annexed to said pleading as Annex A thereof and is quoted on the "ART. 1479. A promise to buy and sell a determinate thing for a
margin.1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally price certain is reciprocally demandable.
demandable," pursuant to the first paragraph of said Article 1479. Although defendant had really An accepted unilateral promise to buy or sell a determinate thing
"agreed, promised and committed" herself to sell the land to the plaintiff, it is not true that the latter for a price certain is binding upon the promisor if the promise is
had, in turn, "agreed and committed himself " to buy said property. Said Annex A does not bear out supported by a consideration distinct from the price."
plaintiff's allegation to this effect. What is more, since Annex A has been made "an integral part" of On the other hand, Appellee contends that, even granting that the "offer of option"
his complaint, the provisions of said instrument form part "and parcel"2 of said pleading. is not supported by any consideration, that option became binding on appellant
when the appellee gave notice to it of its acceptance, and that having accepted it
within the period of option, the offer can no longer be withdrawn and in any event accepting the promise and before he exercises his option, the holder of the option
such withdrawal is ineffective. In support this contention, appellee invokes article is not bound to buy. He is free either to buy or not to buy later. In this case,
1324 of the Civil Code which provides: however, upon accepting herein petitioner's offer a bilateral promise to sell and to
"ART. 1324. When the offerer has allowed the offeree a certain buy ensued, and the respondent ipso facto assumed the obligation of a purchaser.
period to accept, the offer may be withdrawn any time before He did not just get the right subsequently to buy or not to buy. It was not a mere
acceptance by communicating such withdrawal, except when option then; it was a bilateral contract of sale.
the option is founded upon consideration as something paid or Lastly, even supposing that Exh. A granted an option which is not binding for lack
promised." of consideration, the authorities hold that:
There is no question that under article 1479 of the new Civil Code "an option to "If the option is given without a consideration, it is a mere offer
sell," or "a promise to buy or to sell," as used in said article, to be valid must be of a contract of sale, which is not binding until accepted. If,
"supported by a consideration distinct from the price." This is clearly inferred from however, acceptance is made before a withdrawal, it constitutes
the context of said article that a unilateral promise to buy or to sell, even if a binding contract of sale, even though the option was not
accepted, is only binding if supported by consideration. In other words, "an supported by a sufficient consideration. ... . (77 Corpus Juris
accepted unilateral promise can only have a binding effect if supported by a Secundum, p. 652. See also 27 Ruling Case Law 339 and cases
consideration which means that the option can still be withdrawn, even if cited.)
accepted, if the same is not supported by any consideration. It is not disputed that "It can be taken for granted, as contended by the defendant,
the option is without consideration. It can therefore be withdrawn notwithstanding that the option contract was not valid for lack of consideration.
the acceptance of it by appellee. But it was, at least, an offer to sell, which was accepted by letter,
It is true that under article 1324 of the new Civil Code, the general rule regarding and of the acceptance the offerer had knowledge before said
offer and acceptance is that, when the offerer gives to the offeree a certain period offer was withdrawn. The concurrence of both acts — the offer
to accept, "the offer may be withdrawn at any time before acceptance" except and the acceptance — could at all events have generated a
when the option is founded upon consideration, but this general rule must be contract, if none there was before (arts. 1254 and 1262 of the
interpreted as modified by the provision of article 1479 above referred to, which Civil Code)." (Zayco vs. Serra, 44 Phil. 331.)
applies to "a promise to buy and sell" specifically. As already stated, this rule 6
In other words, since there may be no valid contract without a cause or consideration, the promisor
requires that a promise to sell to be valid must be supported by a consideration is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his
distinct from the price. accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a
We are not oblivious of the existence of American authorities which hold that an perfected contract of sale.
offer, once accepted, cannot be withdrawn, regardless of whether it is supported This view has the advantage of avoiding a conflict between Articles 1324 — on the general principles
or not by a consideration (12 Am. Jur. 528). These authorities, we note, uphold on contracts — and 1479 — on sales — of the Civil Code, in line with the cardinal rule of statutory
the general rule applicable to offer and acceptance as contained in our new Civil construction that, in construing different provisions of one and the same law or code, such
Code. But we are prevented from applying them in view of the specific provision interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict
embodied in article 1479. While under the "offer of option" in question appellant between the same. Indeed, the presumption is that, in the process of drafting the Code, its author
has assumed a clear obligation to sell its barge to appellee and the option has has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar &
been exercised in accordance with its terms, and there appears to be no valid or Molasses Co. v. Atlantic Gulf & Pacific Co., 10 holding that Art. 1324 is modified by Art. 1479 of the
justifiable reason for appellant to withdraw its offer, this Court cannot adopt a Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not
different attitude because the law on the matter is clear. Our imperative duty is to favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles
apply it unless modified by Congress. are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art.
However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek,8 decided later 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that
that Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. ,9 saw no distinction between the two (2) provisions intended to enforce or implement the same principle.
Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates
similar to the one sued upon here was involved, treating such promise as an option which, although the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as inconsistent therewith, the
not binding as a contract in itself for lack of a separate consideration, nevertheless generated a view adhered to in the Southwestern Sugar & Molasses Co. case should be deemed abandoned or
bilateral contract of purchase and sale upon acceptance. Speaking through Associate Justice, later modified.
Chief Justice, Cesar Bengzon, this Court said:
WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever Severina Rigos. It is so ordered.
the offeree should decide to exercise his option within the specified time. After
Republic of the Philippines 3. Upon the transfer in their names of the subject property, the Coronels will
SUPREME COURT execute the deed of absolute sale in favor of Ramona and the latter will pay the
Manila former the whole balance of One Million One Hundred Ninety Thousand
THIRD DIVISION (P1,190,000.00) Pesos.
G.R. No. 103577 October 7, 1996 On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz
(hereinafter referred to as Concepcion), mother of Ramona, paid the down
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.
payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").
GONZALES (for herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO
A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, On February 6, 1985, the property originally registered in the name of the
vs. Coronels' father was transferred in their names under TCT
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, No. 327043 (Exh. "D"; Exh. "4")
assisted by GLORIA F. NOEL as attorney-in-fact, respondents. On February 18, 1985, the Coronels sold the property covered by TCT No. 327043
to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina)
MELO, J.:p for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the
latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh.
The petition before us has its roots in a complaint for specific performance to compel herein
"6-C")
petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of
land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties For this reason, Coronels canceled and rescinded the contract (Exh. "A") with
sometime in January 1985 for the price of P1,240,000.00. Ramona by depositing the down payment paid by Concepcion in the bank in trust
for Ramona Patricia Alcaraz.
The undisputed facts of the case were summarized by respondent court in this wise:
On February 22, 1985, Concepcion, et al., filed a complaint for specific
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter
performance against the Coronels and caused the annotation of a notice of lis
referred to as Coronels) executed a document entitled "Receipt of Down Payment"
pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").
(Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
Ramona) which is reproduced hereunder: On April 2, 1985, Catalina caused the annotation of a notice of adverse claim
covering the same property with the Registry of Deeds of Quezon City (Exh. "F"; 7
RECEIPT OF DOWN PAYMENT
Exh. "6").
P1,240,000.00 — Total amount
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
50,000 — Down payment property in favor of Catalina (Exh. "G"; Exh. "7").
——————————— On June 5, 1985, a new title over the subject property was issued in the name of
P1,190,000.00 — Balance Catalina under TCT No. 351582 (Exh. "H"; Exh. "8").
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum (Rollo, pp. 134-136)
of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties
TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of
agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs
P1,240,000.00.
therein (now private respondents) proffered their documentary evidence accordingly marked as
We bind ourselves to effect the transfer in our names from our deceased father, Exhibits "A" through "J", inclusive of their corresponding submarkings. Adopting these same exhibits
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits
the down payment above-stated. "1" through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties,
On our presentation of the TCT already in or name, We will immediately execute the trial court gave them thirty (30) days within which to simultaneously submit their respective
the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall memoranda, and an additional 15 days within which to submit their corresponding comment or reply
immediately pay the balance of the P1,190,000.00. thereof, after which, the case would be deemed submitted for resolution.
Clearly, the conditions appurtenant to the sale are the following: On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989,
execution of the document aforestated; judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the
Quezon City branch, disposing as follows:
2. The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the Fifty Thousand WHEREFORE, judgment for specific performance is hereby rendered ordering
(P50,000.00) Pesos down payment; defendant to execute in favor of plaintiffs a deed of absolute sale covering that
parcel of land embraced in and covered by Transfer Certificate of Title No. 327403
(now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all evidence presented by the parties, she is convinced that the Decision of March 1,
the improvements existing thereon free from all liens and encumbrances, and once 1989 is supported by evidence and, therefore, should not be disturbed.
accomplished, to immediately deliver the said document of sale to plaintiffs and IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul
upon receipt thereof, the said document of sale to plaintiffs and upon receipt Decision and Render Anew Decision by the Incumbent Presiding Judge" dated
thereof, the plaintiffs are ordered to pay defendants the whole balance of the March 20, 1989 is hereby DENIED.
purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title
SO ORDERED.
No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is
hereby canceled and declared to be without force and effect. Defendants and Quezon City, Philippines, July 12, 1989.
intervenor and all other persons claiming under them are hereby ordered to vacate (Rollo, pp. 108-109)
the subject property and deliver possession thereof to plaintiffs. Plaintiffs' claim Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena,
for damages and attorney's fees, as well as the counterclaims of defendants and Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
intervenors are hereby dismissed.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents'
No pronouncement as to costs. Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to
So Ordered. undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom
Macabebe, Pampanga for Quezon City, March 1, 1989. the case was last assigned.
(Rollo, p. 106) While we deem it necessary to introduce certain refinements in the disquisition of respondent court
in the affirmance of the trial court's decision, we definitely find the instant petition bereft of merit.
A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon
City RTC but the same was denied by Judge Estrella T. Estrada, thusly: The heart of the controversy which is the ultimate key in the resolution of the other issues in the
case at bar is the precise determination of the legal significance of the document entitled "Receipt
The prayer contained in the instant motion, i.e., to annul the decision and to render
of Down Payment" which was offered in evidence by both parties. There is no dispute as to the fact
anew decision by the undersigned Presiding Judge should be denied for the
that said document embodied the binding contract between Ramona Patricia Alcaraz on the one
following reasons: (1) The instant case became submitted for decision as of April
hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot
14, 1988 when the parties terminated the presentation of their respective
covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which 8
documentary evidence and when the Presiding Judge at that time was Judge
reads as follows:
Reynaldo Roura. The fact that they were allowed to file memoranda at some future
date did not change the fact that the hearing of the case was terminated before Art. 1305. A contract is a meeting of minds between two persons whereby one
Judge Roura and therefore the same should be submitted to him for decision; (2) binds himself, with respect to the other, to give something or to render some
When the defendants and intervenor did not object to the authority of Judge service.
Reynaldo Roura to decide the case prior to the rendition of the decision, when While, it is the position of private respondents that the "Receipt of Down Payment" embodied a
they met for the first time before the undersigned Presiding Judge at the hearing perfected contract of sale, which perforce, they seek to enforce by means of an action for specific
of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were performance, petitioners on their part insist that what the document signified was a mere executory
deemed to have acquiesced thereto and they are now estopped from questioning contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P.
said authority of Judge Roura after they received the decision in question which Alcaraz, who left for the United States of America, said contract could not possibly ripen into a
happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura contract absolute sale.
was merely a Judge-on-detail at this Branch of the Court, he was in all respects Plainly, such variance in the contending parties' contentions is brought about by the way each
the Presiding Judge with full authority to act on any pending incident submitted interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever
before this Court during his incumbency. When he returned to his Official Station relevant and admissible evidence may be available on record, this, Court, as were the courts below,
at Macabebe, Pampanga, he did not lose his authority to decide or resolve such is now called upon to adjudge what the real intent of the parties was at the time the said document
cases submitted to him for decision or resolution because he continued as Judge was executed.
of the Regional Trial Court and is of co-equal rank with the undersigned Presiding
Judge. The standing rule and supported by jurisprudence is that a Judge to whom The Civil Code defines a contract of sale, thus:
a case is submitted for decision has the authority to decide the case Art. 1458. By the contract of sale one of the contracting parties obligates himself
notwithstanding his transfer to another branch or region of the same court (Sec. to transfer the ownership of and to deliver a determinate thing, and the other to
9, Rule 135, Rule of Court). pay therefor a price certain in money or its equivalent.
Coming now to the twin prayer for reconsideration of the Decision dated March 1, Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
1989 rendered in the instant case, resolution of which now pertains to the essential elements of a contract of sale are the following:
undersigned Presiding Judge, after a meticulous examination of the documentary
a) Consent or meeting of the minds, that is, consent to transfer ownership in have been previously delivered to him. The prospective seller still has to convey title to the
exchange for the price; prospective buyer by entering into a contract of absolute sale.
b) Determinate subject matter; and It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
c) Price certain in money or its equivalent. cases where the subject property is sold by the owner not to the party the seller contracted with,
but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first
the property, a third person buying such property despite the fulfillment of the suspensive condition
essential element is lacking. In a contract to sell, the prospective seller explicity reserves the transfer
such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to
and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double
transfer ownership of the property subject of the contract to sell until the happening of an event,
sale in such case. Title to the property will transfer to the buyer after registration because there is
which for present purposes we shall take as the full payment of the purchase price. What the seller
no defect in the owner-seller's title per se, but the latter, of course, may be used for damages by
agrees or obliges himself to do is to fulfill is promise to sell the subject property when the entire
the intending buyer.
amount of the purchase price is delivered to him. In other words the full payment of the purchase
price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
from arising and thus, ownership is retained by the prospective seller without further remedies by becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been
the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: previous delivery of the subject property, the seller's ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer have any title to transfer
Hence, We hold that the contract between the petitioner and the respondent was
to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who
a contract to sell where the ownership or title is retained by the seller and is not
may have had actual or constructive knowledge of such defect in the seller's title, or at least was
to pass until the full payment of the price, such payment being a positive
charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second
suspensive condition and failure of which is not a breach, casual or serious, but
buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer
simply an event that prevented the obligation of the vendor to convey title from
may seek reconveyance of the property subject of the sale.
acquiring binding force.
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
of the contract entered into by petitioners and private respondents.
purchase price, the prospective seller's obligation to sell the subject property by entering into a
contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the It is a canon in the interpretation of contracts that the words used therein should be given their 9
Civil Code which states: natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of
Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down
Art. 1479. A promise to buy and sell a determinate thing for a price certain is
Payment" that they —
reciprocally demandable.
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum
An accepted unilateral promise to buy or to sell a determinate thing for a price
of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by
certain is binding upon the promissor if the promise is supported by a consideration
TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of
distinct from the price.
P1,240,000.00.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
without any reservation of title until full payment of the entire purchase price, the natural
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
and ordinary idea conveyed is that they sold their property.
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price. When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that
there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of
certificate of title was still in the name of petitioner's father, they could not fully effect such transfer
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment
although the buyer was then willing and able to immediately pay the purchase price. Therefore,
of a suspensive condition, because in a conditional contract of sale, the first element of consent is
petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P.
present, although it is conditioned upon the happening of a contingent event which may or may not
Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father,
occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely
after which, they promised to present said title, now in their names, to the latter and to execute the
abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if
deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase
the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had
price.
already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be The agreement could not have been a contract to sell because the sellers herein made no express
performed by the seller. reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which
prevented the parties from entering into an absolute contract of sale pertained to the sellers
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
themselves (the certificate of title was not in their names) and not the full payment of the purchase
purchase price, ownership will not automatically transfer to the buyer although the property may
price. Under the established facts and circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-sellers at that time, there would have Art. 1181. In conditional obligations, the acquisition of rights, as well as the
been no reason why an absolute contract of sale could not have been executed and consummated extinguishment or loss of those already acquired, shall depend upon the happening
right there and then. of the event which constitutes the condition.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the Since the condition contemplated by the parties which is the issuance of a certificate of title in
properly to private respondent upon the fulfillment of the suspensive condition. On the contrary, petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under
having already agreed to sell the subject property, they undertook to have the certificate of title the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to
changed to their names and immediately thereafter, to execute the written deed of absolute sale. present the transfer certificate of title already in their names to private respondent Ramona P.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her
the buyer with certain terms and conditions, promised to sell the property to the latter. What may part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00.
be perceived from the respective undertakings of the parties to the contract is that petitioners had It is also significant to note that in the first paragraph in page 9 of their petition, petitioners
already agreed to sell the house and lot they inherited from their father, completely willing to transfer conclusively admitted that:
full ownership of the subject house and lot to the buyer if the documents were then in order. It just 3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our
happened, however, that the transfer certificate of title was then still in the name of their father. It names from our deceased father Constancio P. Coronel, the transfer certificate of
was more expedient to first effect the change in the certificate of title so as to bear their names. title immediately upon receipt of the downpayment above-stated". The sale was
That is why they undertook to cause the issuance of a new transfer of the certificate of title in their still subject to this suspensive condition. (Emphasis supplied.)
names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate
(Rollo, p. 16)
of title is issued in their names, petitioners were committed to immediately execute the deed of
absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive
arise. condition. Only, they contend, continuing in the same paragraph, that:
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to . . . Had petitioners-sellers not complied with this condition of first transferring the
protect the seller against a buyer who intends to buy the property in installment by withholding title to the property under their names, there could be no perfected contract of
ownership over the property until the buyer effects full payment therefor, in the contract entered sale. (Emphasis supplied.)
into in the case at bar, the sellers were the one who were unable to enter into a contract of absolute (Ibid.)
sale by reason of the fact that the certificate of title to the property was still in the name of their 10
not aware that they set their own trap for themselves, for Article 1186 of the Civil Code
father. It was the sellers in this case who, as it were, had the impediment which prevented, so to expressly provides that:
speak, the execution of an contract of absolute sale.
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily
What is clearly established by the plain language of the subject document is that when the said prevents its fulfillment.
"Receipt of Down Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the
parties had agreed to a conditional contract of sale, consummation of which is subject only to the Besides, it should be stressed and emphasized that what is more controlling than these mere
successful transfer of the certificate of title from the name of petitioners' father, Constancio P. hypothetical arguments is the fact that the condition herein referred to was actually and indisputably
Coronel, to their names. fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced
by TCT No. 327403 (Exh. "D"; Exh. "4").
The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985
(Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated
private respondent Ramona P. Alcaraz became obligatory, the only act required for the as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject
consummation thereof being the delivery of the property by means of the execution of the deed of only to the suspensive condition that the sellers shall effect the issuance of new certificate title from
absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as that of their father's name to their names and that, on February 6, 1985, this condition was fulfilled
evidenced by the "Receipt of Down Payment." (Exh. "D"; Exh. "4").
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at We, therefore, hold that, in accordance with Article 1187 which pertinently provides —
bench. Thus, Art. 1187. The effects of conditional obligation to give, once the condition has been
Art. 1475. The contract of sale is perfected at the moment there is a meeting of fulfilled, shall retroact to the day of the constitution of the obligation . . .
minds upon the thing which is the object of the contract and upon the price. In obligation to do or not to do, the courts shall determine, in each case, the
From the moment, the parties may reciprocally demand performance, subject to retroactive effect of the condition that has been complied with.
the provisions of the law governing the form of contracts. the rights and obligations of the parties with respect to the perfected contract of sale
became mutually due and demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of
both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA
were then not yet the absolute owners of the inherited property. 722 [1984])
We cannot sustain this argument. Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the
buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights
for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made
and obligations to be extent and value of the inheritance of a person are
by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of
transmitted through his death to another or others by his will or by operation of
Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's
law.
authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they
Petitioners-sellers in the case at bar being the sons and daughters of the decedent raise any objection as regards payment being effected by a third person. Accordingly, as far as
Constancio P. Coronel are compulsory heirs who were called to succession by operation of petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the
law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes contract of sale.
insofar as the subject property is concerned, such that any rights or obligations pertaining
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to
thereto became binding and enforceable upon them. It is expressly provided that rights to
pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense
the succession are transmitted from the moment of death of the decedent (Article 777, Civil
of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to
Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
show that they actually presented the new transfer certificate of title in their names and signified
Be it also noted that petitioners' claim that succession may not be declared unless the creditors have their willingness and readiness to execute the deed of absolute sale in accordance with their
been paid is rendered moot by the fact that they were able to effect the transfer of the title to the agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the
property from the decedent's name to their names on February 6, 1985. amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into be deemed to have been in default.
an agreement at that time and they cannot be allowed to now take a posture contrary to that which Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may
they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The be considered in default, to wit:
Civil Code expressly states that:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the 11
Art. 1431. Through estoppel an admission or representation is rendered conclusive time the obligee judicially or extrajudicially demands from them the fulfillment of
upon the person making it, and cannot be denied or disproved as against the their obligation.
person relying thereon.
xxx xxx xxx
Having represented themselves as the true owners of the subject property at the time of
In reciprocal obligations, neither party incurs in delay if the other does not comply
sale, petitioners cannot claim now that they were not yet the absolute owners thereof at
or is not ready to comply in a proper manner with what is incumbent upon him .
that time.
From the moment one of the parties fulfill his obligation, delay by the other begins.
Petitioners also contend that although there was in fact a perfected contract of sale between them (Emphasis supplied.)
and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
the consummation thereof by going to the United States of America, without leaving her address,
respondents.
telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a
conclude, they were correct in unilaterally rescinding rescinding the contract of sale. case of double sale where Article 1544 of the Civil Code will apply, to wit:
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant Art. 1544. If the same thing should have been sold to different vendees, the
case. We note that these supposed grounds for petitioners' rescission, are mere allegations found ownership shall be transferred to the person who may have first taken possession
only in their responsive pleadings, which by express provision of the rules, are deemed controverted thereof in good faith, if it should be movable property.
even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are Should if be immovable property, the ownership shall belong to the person
absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We have acquiring it who in good faith first recorded it in Registry of Property.
stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Should there be no inscription, the ownership shall pertain to the person who in
Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not an good faith was first in the possession; and, in the absence thereof to the person
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). who presents the oldest title, provided there is good faith.
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
6, 1985, we cannot justify petitioner-sellers' act of unilaterally and extradicially rescinding the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the
contract of sale, there being no express stipulation authorizing the sellers to extarjudicially rescind
issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146;
second paragraph of Article 1544 shall apply. Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18,
buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, 1985, was correctly upheld by both the courts below.
in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer Although there may be ample indications that there was in fact an agency between Ramona as
satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned,
buyer. the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished squarely raised in the instant petition, nor in such assumption disputed between mother and
member of the Court, Justice Jose C. Vitug, explains: daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this
The governing principle is prius tempore, potior jure (first in time, stronger in point.
right). Knowledge by the first buyer of the second sale cannot defeat the first WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
buyer's rights except when the second buyer first registers in good faith the second judgment AFFIRMED.
sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the SO ORDERED.
second buyer of the first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No.
56232, 22 June 1984, 129 SCRA 656), it has held that it is essential, to merit the
protection of Art. 1544, second paragraph, that the second realty buyer must act
in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals,
69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the 12
subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels
and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea
conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a
clean title, she was unaware of any adverse claim or previous sale, for which reason she is buyer in
good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer
was a buyer in good faith but whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a
notice of lis pendens had been annotated on the transfer certificate of title in the names of
petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time
of registration, therefore, petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged with knowledge that a previous
buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect
in petitioners' title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired knowledge
that there was a previous sale of the same property to a third party or that another
person claims said property in a pervious sale, the registration will constitute a
registration in bad faith and will not confer upon him any right. (Salvoro vs.
Republic of the Philippines 4. All expenses including the corresponding capital gains tax, cost of documentary
SUPREME COURT stamps are for the account of the VENDORS, and expenses for the registration of
Manila the deed of sale in the Registry of Deeds are for the account of ADELFA
SECOND DIVISION PROPERTIES, INC.
Considering, however, that the owner's copy of the certificate of title issued to respondent Salud
Jimenez had been lost, a petition for the re-issuance of a new owner's copy of said certificate of title
G.R. No. 111238 January 25, 1995
was filed in court through Atty. Bayani L. Bernardo, who acted as private respondents' counsel.
ADELFA PROPERTIES, INC., petitioner, Eventually, a new owner's copy of the certificate of title was issued but it remained in the possession
vs. of Atty. Bernardo until he turned it over to petitioner Adelfa Properties, Inc.
COURT OF APPEALS, ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.
4. Before petitioner could make payment, it received summons6 on November 29, 1989, together
with a copy of a complaint filed by the nephews and nieces of private respondents against the latter,
REGALADO, J.: Jose and Dominador Jimenez, and herein petitioner in the Regional Trial Court of Makati, docketed
The main issues presented for resolution in this petition for review on certiorari of the judgment of as Civil Case No. 89-5541, for annulment of the deed of sale in favor of Household Corporation and
respondent Court of appeals, dated April 6, 1993, in CA-G.R. CV No. 347671 are (1) whether of not recovery of ownership of the property covered by TCT No. 309773.7
the "Exclusive Option to Purchase" executed between petitioner Adelfa Properties, Inc. and private 5. As a consequence, in a letter dated November 29, 1989, petitioner informed private respondents
respondents Rosario Jimenez-Castañeda and Salud Jimenez is an option contract; and (2) whether that it would hold payment of the full purchase price and suggested that private respondents settle
or not there was a valid suspension of payment of the purchase price by said petitioner, and the the case with their nephews and nieces, adding that ". . . if possible, although November 30, 1989
legal effects thereof on the contractual relations of the parties. is a holiday, we will be waiting for you and said plaintiffs at our office up to 7:00 p.m." 8 Another
The records disclose the following antecedent facts which culminated in the present appellate review, letter of the same tenor and of even date was sent by petitioner to Jose and Dominador
to wit: Jimenez.9 Respondent Salud Jimenez refused to heed the suggestion of petitioner and attributed the
suspension of payment of the purchase price to "lack of word of honor."
1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were the registered
co-owners of a parcel of land consisting of 17,710 square meters, covered by Transfer Certificate of 6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its option contract
Title (TCT) No. 309773,2situated in Barrio Culasi, Las Piñas, Metro Manila. with private respondents, and its contract of sale with Jose and Dominador Jimenez, as Entry No. 13
1437-4 and entry No. 1438-4, respectively.
2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-half of said
parcel of land, specifically the eastern portion thereof, to herein petitioner pursuant to a " Kasulatan 7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty. Bernardo, in his
sa Bilihan ng Lupa."3Subsequently, a "Confirmatory Extrajudicial Partition Agreement"4 was executed capacity as petitioner's counsel, and to inform the latter that they were cancelling the transaction.
by the Jimenezes, wherein the eastern portion of the subject lot, with an area of 8,855 square meters In turn, Atty. Bernardo offered to pay the purchase price provided that P500,000.00 be deducted
was adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to herein therefrom for the settlement of the civil case. This was rejected by private respondents. On December
private respondents. 22, 1989, Atty. Bernardo wrote private respondents on the same matter but this time reducing the
amount from P500,000.00 to P300,000.00, and this was also rejected by the latter.
3. Thereafter, herein petitioner expressed interest in buying the western portion of the property from
private respondents. Accordingly, on November 25, 1989, an "Exclusive Option to Purchase" 5 was 8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case No. 89-5541. Thus,
executed between petitioner and private respondents, under the following terms and conditions: on February 28, 1990, petitioner caused to be annotated anew on TCT No. 309773 the exclusive
option to purchase as Entry No. 4442-4.
1. The selling price of said 8,655 square meters of the subject property is TWO
MILLION EIGHT HUNDRED FIFTY SIX THOUSAND ONE HUNDRED FIFTY PESOS 9. On the same day, February 28, 1990, private respondents executed a Deed of Conditional Sale 10 in
ONLY (P2,856,150.00) favor of Emylene Chua over the same parcel of land for P3,029,250, of which P1,500,000.00 was
paid to private respondents on said date, with the balance to be paid upon the transfer of title to the
2. The sum of P50,000.00 which we received from ADELFA PROPERTIES, INC. as specified one-half portion.
an option money shall be credited as partial payment upon the consummation of
the sale and the balance in the sum of TWO MILLION EIGHT HUNDRED SIX 10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter that in view of
THOUSAND ONE HUNDRED FIFTY PESOS (P2,806,150.00) to be paid on or before the dismissal of the case against them, petitioner was willing to pay the purchase price, and he
November 30, 1989; requested that the corresponding deed of absolute sale be executed. 11 This was ignored by private
respondents.
3. In case of default on the part of ADELFA PROPERTIES, INC. to pay said balance
in accordance with paragraph 2 hereof, this option shall be cancelled and 50% of 11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing therein a
the option money to be forfeited in our favor and we will refund the remaining check for P25,000.00 representing the refund of fifty percent of the option money paid under the
50% of said money upon the sale of said property to a third party; exclusive option to purchase. Private respondents then requested petitioner to return the owner's
duplicate copy of the certificate of title of respondent Salud Jimenez. 12 Petitioner failed to surrender
the certificate of title, hence private respondents filed Civil Case No. 7532 in the Regional Trial Court full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership
of Pasay City, Branch 113, for annulment of contract with damages, praying, among others, that the until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained
exclusive option to purchase be declared null and void; that defendant, herein petitioner, be ordered by the vendor until the full payment of the price, such payment being a positive suspensive condition
to return the owner's duplicate certificate of title; and that the annotation of the option contract on and failure of which is not a breach but an event that prevents the obligation of the vendor to convey
TCT No. 309773 be cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a complaint title from becoming effective. Thus, a deed of sale is considered absolute in nature where there is
in intervention. neither a stipulation in the deed that title to the property sold is reserved in the seller until the full
12. The trial court rendered judgment 13 therein on September 5, 1991 holding that the agreement payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the
entered into by the parties was merely an option contract, and declaring that the suspension of moment the buyer fails to pay within a fixed period. 15
payment by herein petitioner constituted a counter-offer which, therefore, was tantamount to a There are two features which convince us that the parties never intended to transfer ownership to
rejection of the option. It likewise ruled that herein petitioner could not validly suspend payment in petitioner except upon the full payment of the purchase price. Firstly, the exclusive option to
favor of private respondents on the ground that the vindicatory action filed by the latter's kin did not purchase, although it provided for automatic rescission of the contract and partial forfeiture of the
involve the western portion of the land covered by the contract between petitioner and private amount already paid in case of default, does not mention that petitioner is obliged to return
respondents, but the eastern portion thereof which was the subject of the sale between petitioner possession or ownership of the property as a consequence of non-payment. There is no stipulation
and the brothers Jose and Dominador Jimenez. The trial court then directed the cancellation of the anent reversion or reconveyance of the property to herein private respondents in the event that
exclusive option to purchase, declared the sale to intervenor Emylene Chua as valid and binding, and petitioner does not comply with its obligation. With the absence of such a stipulation, although there
ordered petitioner to pay damages and attorney's fees to private respondents, with costs. is a provision on the remedies available to the parties in case of breach, it may legally be inferred
13. On appeal, respondent Court of appeals affirmed in toto the decision of the court a quo and held that the parties never intended to transfer ownership to the petitioner to completion of payment of
that the failure of petitioner to pay the purchase price within the period agreed upon was tantamount the purchase price.
to an election by petitioner not to buy the property; that the suspension of payment constituted an In effect, there was an implied agreement that ownership shall not pass to the purchaser until he
imposition of a condition which was actually a counter-offer amounting to a rejection of the option; had fully paid the price. Article 1478 of the civil code does not require that such a stipulation be
and that Article 1590 of the Civil Code on suspension of payments applies only to a contract of sale expressly made. Consequently, an implied stipulation to that effect is considered valid and, therefore,
or a contract to sell, but not to an option contract which it opined was the nature of the document binding and enforceable between the parties. It should be noted that under the law and
subject of the case at bar. Said appellate court similarly upheld the validity of the deed of conditional jurisprudence, a contract which contains this kind of stipulation is considered a contract to sell.
sale executed by private respondents in favor of intervenor Emylene Chua. Moreover, that the parties really intended to execute a contract to sell, and not a contract of sale, is 14
In the present petition, the following assignment of errors are raised: bolstered by the fact that the deed of absolute sale would have been issued only upon the payment
1. Respondent court of appeals acted with grave abuse of discretion in making its finding that the of the balance of the purchase price, as may be gleaned from petitioner's letter dated April 16,
agreement entered into by petitioner and private respondents was strictly an option contract; 1990 16 wherein it informed private respondents that it "is now ready and willing to pay you
simultaneously with the execution of the corresponding deed of absolute sale."
2. Granting arguendo that the agreement was an option contract, respondent court of Appeals acted
with grave abuse of discretion in grievously failing to consider that while the option period had not Secondly, it has not been shown there was delivery of the property, actual or constructive, made to
lapsed, private respondents could not unilaterally and prematurely terminate the option period; herein petitioner. The exclusive option to purchase is not contained in a public instrument the
execution of which would have been considered equivalent to delivery. 17 Neither did petitioner take
3. Respondent Court of Appeals acted with grave abuse of discretion in failing to appreciate fully the
actual, physical possession of the property at any given time. It is true that after the reconstitution
attendant facts and circumstances when it made the conclusion of law that Article 1590 does not
of private respondents' certificate of title, it remained in the possession of petitioner's counsel, Atty.
apply; and
Bayani L. Bernardo, who thereafter delivered the same to herein petitioner. Normally, under the law,
4. Respondent Court of Appeals acted with grave abuse of discretion in conforming with the sale in such possession by the vendee is to be understood as a delivery.18 However, private respondents
favor of appellee Ma. Emylene Chua and the award of damages and attorney's fees which are not explained that there was really no intention on their part to deliver the title to herein petitioner with
only excessive, but also without in fact and in law. 14 the purpose of transferring ownership to it. They claim that Atty. Bernardo had possession of the
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, title only because he was their counsel in the petition for reconstitution. We have no reason not to
irresistibly leads to the conclusion that the agreement between the parties is a contract to sell, and believe this explanation of private respondents, aside from the fact that such contention was never
not an option contract or a contract of sale. refuted or contradicted by petitioner.
I 2. Irrefragably, the controverted document should legally be considered as a perfected contract to
1. In view of the extended disquisition thereon by respondent court, it would be worthwhile at this sell. On this particular point, therefore, we reject the position and ratiocination of respondent Court
juncture to briefly discourse on the rationale behind our treatment of the alleged option contract as of Appeals which, while awarding the correct relief to private respondents, categorized the instrument
a contract to sell, rather than a contract of sale. The distinction between the two is important for in as "strictly an option contract."
contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a The important task in contract interpretation is always the ascertainment of the intention of the
contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the contracting parties and that task is, of course, to be discharged by looking to the words they used
to project that intention in their contract, all the words not just a particular word or two, and words supposed to pay the same on November 25, 1989, but it later offered to make a down payment of
in context not words standing alone. 19 Moreover, judging from the subsequent acts of the parties P50,000.00, with the balance of P2,806,150.00 to be paid on or before November 30, 1989. Private
which will hereinafter be discussed, it is undeniable that the intention of the parties was to enter into respondents agreed to the counter-offer made by petitioner. 31 As a result, the so-called exclusive
a contract to sell. 20 In addition, the title of a contract does not necessarily determine its true option to purchase was prepared by petitioner and was subsequently signed by private respondents,
nature. 21 Hence, the fact that the document under discussion is entitled "Exclusive Option to thereby creating a perfected contract to sell between them.
Purchase" is not controlling where the text thereof shows that it is a contract to sell. It cannot be gainsaid that the offer to buy a specific piece of land was definite and certain, while the
An option, as used in the law on sales, is a continuing offer or contract by which the owner stipulates acceptance thereof was absolute and without any condition or qualification. The agreement as to the
with another that the latter shall have the right to buy the property at a fixed price within a certain object, the price of the property, and the terms of payment was clear and well-defined. No other
time, or under, or in compliance with, certain terms and conditions, or which gives to the owner of significance could be given to such acts that than they were meant to finalize and perfect the
the property the right to sell or demand a sale. It is also sometimes called an "unaccepted offer." An transaction. The parties even went beyond the basic requirements of the law by stipulating that "all
option is not of itself a purchase, but merely secures the privilege to buy. 22 It is not a sale of property expenses including the corresponding capital gains tax, cost of documentary stamps are for the
but a sale of property but a sale of the right to purchase. 23 It is simply a contract by which the account of the vendors, and expenses for the registration of the deed of sale in the Registry of Deeds
owner of property agrees with another person that he shall have the right to buy his property at a are for the account of Adelfa properties, Inc." Hence, there was nothing left to be done except the
fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he performance of the respective obligations of the parties.
does sell something, that it is, the right or privilege to buy at the election or option of the other We do not subscribe to private respondents' submission, which was upheld by both the trial court
party. 24 Its distinguishing characteristic is that it imposes no binding obligation on the person holding and respondent court of appeals, that the offer of petitioner to deduct P500,000.00, (later reduced
the option, aside from the consideration for the offer. Until acceptance, it is not, properly speaking, to P300,000.00) from the purchase price for the settlement of the civil case was tantamount to a
a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in counter-offer. It must be stressed that there already existed a perfected contract between the parties
the subject matter, but is merely a contract by which the owner of property gives the optionee the at the time the alleged counter-offer was made. Thus, any new offer by a party becomes binding
right or privilege of accepting the offer and buying the property on certain terms. 25 only when it is accepted by the other. In the case of private respondents, they actually refused to
On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons concur in said offer of petitioner, by reason of which the original terms of the contract continued to
whereby one binds himself, with respect to the other, to give something or to render some be enforceable.
service. 26 Contracts, in general, are perfected by mere consent, 27 which is manifested by the At any rate, the same cannot be considered a counter-offer for the simple reason that petitioner's
meeting of the offer and the acceptance upon the thing and the cause which are to constitute the sole purpose was to settle the civil case in order that it could already comply with its obligation. In 15
contract. The offer must be certain and the acceptance absolute. 28 fact, it was even indicative of a desire by petitioner to immediately comply therewith, except that it
The distinction between an "option" and a contract of sale is that an option is an unaccepted offer. was being prevented from doing so because of the filing of the civil case which, it believed in good
It states the terms and conditions on which the owner is willing to sell the land, if the holder elects faith, rendered compliance improbable at that time. In addition, no inference can be drawn from that
to accept them within the time limited. If the holder does so elect, he must give notice to the other suggestion given by petitioner that it was totally abandoning the original contract.
party, and the accepted offer thereupon becomes a valid and binding contract. If an acceptance is More importantly, it will be noted that the failure of petitioner to pay the balance of the purchase
not made within the time fixed, the owner is no longer bound by his offer, and the option is at an price within the agreed period was attributed by private respondents to "lack of word of honor" on
end. A contract of sale, on the other hand, fixes definitely the relative rights and obligations of both the part of the former. The reason of "lack of word of honor" is to us a clear indication that private
parties at the time of its execution. The offer and the acceptance are concurrent, since the minds of respondents considered petitioner already bound by its obligation to pay the balance of the
the contracting parties meet in the terms of the agreement. 29 consideration. In effect, private respondents were demanding or exacting fulfillment of the obligation
A perusal of the contract in this case, as well as the oral and documentary evidence presented by from herein petitioner. with the arrival of the period agreed upon by the parties, petitioner was
the parties, readily shows that there is indeed a concurrence of petitioner's offer to buy and private supposed to comply with the obligation incumbent upon it to perform, not merely to exercise an
respondents' acceptance thereof. The rule is that except where a formal acceptance is so required, option or a right to buy the property.
although the acceptance must be affirmatively and clearly made and must be evidenced by some The obligation of petitioner on November 30, 1993 consisted of an obligation to give something, that
acts or conduct communicated to the offeror, it may be made either in a formal or an informal is, the payment of the purchase price. The contract did not simply give petitioner the discretion to
manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest pay for the property. 32 It will be noted that there is nothing in the said contract to show that
a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be petitioner was merely given a certain period within which to exercise its privilege to buy. The agreed
shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale. 30 period was intended to give time to herein petitioner within which to fulfill and comply with its
The records also show that private respondents accepted the offer of petitioner to buy their property obligation, that is, to pay the balance of the purchase price. No evidence was presented by private
under the terms of their contract. At the time petitioner made its offer, private respondents suggested respondents to prove otherwise.
that their transfer certificate of title be first reconstituted, to which petitioner agreed. As a matter of The test in determining whether a contract is a "contract of sale or purchase" or a mere "option" is
fact, it was petitioner's counsel, Atty. Bayani L. Bernardo, who assisted private respondents in filing whether or not the agreement could be specifically enforced. 33 There is no doubt that the obligation
a petition for reconstitution. After the title was reconstituted, the parties agreed that petitioner would of petitioner to pay the purchase price is specific, definite and certain, and consequently binding and
pay either in cash or manager's check the amount of P2,856,150.00 for the lot. Petitioner was
enforceable. Had private respondents chosen to enforce the contract, they could have specifically of the price until the vendor has caused the disturbance or danger to cease, unless
compelled petitioner to pay the balance of P2,806,150.00. This is distinctly made manifest in the the latter gives security for the return of the price in a proper case, or it has been
contract itself as an integral stipulation, compliance with which could legally and definitely be stipulated that, notwithstanding any such contingency, the vendee shall be bound
demanded from petitioner as a consequence. to make the payment. A mere act of trespass shall not authorize the suspension
This is not a case where no right is as yet created nor an obligation declared, as where something of the payment of the price.
further remains to be done before the buyer and seller obligate themselves. 34 An agreement is only Respondent court refused to apply the aforequoted provision of law on the erroneous assumption
an "option" when no obligation rests on the party to make any payment except such as may be that the true agreement between the parties was a contract of option. As we have hereinbefore
agreed on between the parties as consideration to support the option until he has made up his mind discussed, it was not an option contract but a perfected contract to sell. Verily, therefore, Article
within the time specified. 35 An option, and not a contract to purchase, is effected by an agreement 1590 would properly apply.
to sell real estate for payments to be made within specified time and providing forfeiture of money Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed against the parties
paid upon failure to make payment, where the purchaser does not agree to purchase, to make herein involved only the eastern half of the land subject of the deed of sale between petitioner and
payment, or to bind himself in any way other than the forfeiture of the payments made. 36 As the Jimenez brothers, it did not, therefore, have any adverse effect on private respondents' title and
hereinbefore discussed, this is not the situation obtaining in the case at bar. ownership over the western half of the land which is covered by the contract subject of the present
While there is jurisprudence to the effect that a contract which provides that the initial payment shall case. We have gone over the complaint for recovery of ownership filed in said case 41 and we are
be totally forfeited in case of default in payment is to be considered as an option contract, 37 still we not persuaded by the factual findings made by said courts. At a glance, it is easily discernible that,
are not inclined to conform with the findings of respondent court and the court a quo that the although the complaint prayed for the annulment only of the contract of sale executed between
contract executed between the parties is an option contract, for the reason that the parties were petitioner and the Jimenez brothers, the same likewise prayed for the recovery of therein plaintiffs'
already contemplating the payment of the balance of the purchase price, and were not merely share in that parcel of land specifically covered by TCT No. 309773. In other words, the plaintiffs
quoting an agreed value for the property. The term "balance," connotes a remainder or something therein were claiming to be co-owners of the entire parcel of land described in TCT No. 309773, and
remaining from the original total sum already agreed upon. not only of a portion thereof nor, as incorrectly interpreted by the lower courts, did their claim pertain
In other words, the alleged option money of P50,000.00 was actually earnest money which was exclusively to the eastern half adjudicated to the Jimenez brothers.
intended to form part of the purchase price. The amount of P50,000.00 was not distinct from the Such being the case, petitioner was justified in suspending payment of the balance of the purchase
cause or consideration for the sale of the property, but was itself a part thereof. It is a statutory rule price by reason of the aforesaid vindicatory action filed against it. The assurance made by private
that whenever earnest money is given in a contract of sale, it shall be considered as part of the price respondents that petitioner did not have to worry about the case because it was pure and simple 16
and as proof of the perfection of the contract. 38 It constitutes an advance payment and must, harassment 42 is not the kind of guaranty contemplated under the exceptive clause in Article 1590
therefore, be deducted from the total price. Also, earnest money is given by the buyer to the seller wherein the vendor is bound to make payment even with the existence of a vindicatory action if the
to bind the bargain. vendee should give a security for the return of the price.
There are clear distinctions between earnest money and option money, viz.: (a) earnest money is 2. Be that as it may, and the validity of the suspension of payment notwithstanding, we find and
part of the purchase price, while option money ids the money given as a distinct consideration for hold that private respondents may no longer be compelled to sell and deliver the subject property to
an option contract; (b) earnest money is given only where there is already a sale, while option money petitioner for two reasons, that is, petitioner's failure to duly effect the consignation of the purchase
applies to a sale not yet perfected; and (c) when earnest money is given, the buyer is bound to pay price after the disturbance had ceased; and, secondarily, the fact that the contract to sell had been
the balance, while when the would-be buyer gives option money, he is not required to buy. 39 validly rescinded by private respondents.
The aforequoted characteristics of earnest money are apparent in the so-called option contract under The records of this case reveal that as early as February 28, 1990 when petitioner caused its exclusive
review, even though it was called "option money" by the parties. In addition, private respondents option to be annotated anew on the certificate of title, it already knew of the dismissal of civil Case
failed to show that the payment of the balance of the purchase price was only a condition precedent No. 89-5541. However, it was only on April 16, 1990 that petitioner, through its counsel, wrote
to the acceptance of the offer or to the exercise of the right to buy. On the contrary, it has been private respondents expressing its willingness to pay the balance of the purchase price upon the
sufficiently established that such payment was but an element of the performance of petitioner's execution of the corresponding deed of absolute sale. At most, that was merely a notice to pay.
obligation under the contract to sell. 40 There was no proper tender of payment nor consignation in this case as required by law.
II The mere sending of a letter by the vendee expressing the intention to
1. This brings us to the second issue as to whether or not there was valid suspension of payment of pay, without the accompanying payment, is not considered a valid tender of payment. 43 Besides, a
the purchase price by petitioner and the legal consequences thereof. To justify its failure to pay the mere tender of payment is not sufficient to compel private respondents to deliver the property and
purchase price within the agreed period, petitioner invokes Article 1590 of the civil Code which execute the deed of absolute sale. It is consignation which is essential in order to extinguish
provides: petitioner's obligation to pay the balance of the purchase price. 44 The rule is different in case of an
option contract 45 or in legal redemption or in a sale with right to repurchase, 46 wherein consignation
Art. 1590. Should the vendee be disturbed in the possession or ownership of the
is not necessary because these cases involve an exercise of a right or privilege (to buy, redeem or
thing acquired, or should he have reasonable grounds to fear such disturbance, by
repurchase) rather than the discharge of an obligation, hence tender of payment would be sufficient
a vindicatory action or a foreclosure of mortgage, he may suspend the payment
to preserve the right or privilege. This is because the provisions on consignation are not applicable
when there is no obligation to pay. 47 A contract to sell, as in the case before us, involves the
performance of an obligation, not merely the exercise of a privilege of a right. consequently,
performance or payment may be effected not by tender of payment alone but by both tender and
consignation.
Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased
with the dismissal of the civil case filed against it. Necessarily, therefore, its obligation to pay the
balance again arose and resumed after it received notice of such dismissal. Unfortunately, petitioner
failed to seasonably make payment, as in fact it has deposit the money with the trial court when this
case was originally filed therein.
By reason of petitioner's failure to comply with its obligation, private respondents elected to resort
to and did announce the rescission of the contract through its letter to petitioner dated July 27, 1990.
That written notice of rescission is deemed sufficient under the circumstances. Article 1592 of the
Civil Code which requires rescission either by judicial action or notarial act is not applicable to a
contract to sell. 48 Furthermore, judicial action for rescission of a contract is not necessary where the
contract provides for automatic rescission in case of breach, 49 as in the contract involved in the
present controversy.
We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that the
right to rescind is not absolute, being ever subject to scrutiny and review by the proper court. It is
our considered view, however, that this rule applies to a situation where the extrajudicial rescission
is contested by the defaulting party. In other words, resolution of reciprocal contracts may be made
extrajudicially unless successfully impugned in court. If the debtor impugns the declaration, it shall
be subject to judicial determination51 otherwise, if said party does not oppose it, the extrajudicial
rescission shall have legal effect. 52 17
In the case at bar, it has been shown that although petitioner was duly furnished and did receive a
written notice of rescission which specified the grounds therefore, it failed to reply thereto or protest
against it. Its silence thereon suggests an admission of the veracity and validity of private
respondents' claim. 53 Furthermore, the initiative of instituting suit was transferred from the rescinder
to the defaulter by virtue of the automatic rescission clause in the contract. 54 But then, the records
bear out the fact that aside from the lackadaisical manner with which petitioner treated private
respondents' latter of cancellation, it utterly failed to seriously seek redress from the court for the
enforcement of its alleged rights under the contract. If private respondents had not taken the
initiative of filing Civil Case No. 7532, evidently petitioner had no intention to take any legal action
to compel specific performance from the former. By such cavalier disregard, it has been effectively
estopped from seeking the affirmative relief it now desires but which it had theretofore disdained.
WHEREFORE, on the foregoing modificatory premises, and considering that the same result has been
reached by respondent Court of Appeals with respect to the relief awarded to private respondents
by the court a quo which we find to be correct, its assailed judgment in CA-G.R. CV No. 34767 is
hereby AFFIRMED.
SO ORDERED.
[G.R. No. 106418. July 11, 1996] Address: 14 Colt St., Rancho Estate I, Concepcion Dos, Marikina, MM
DANIEL L. BORDON II AND FRANCISCO L. BORBON, petitioners, vs. SERVICEWIDE (S/t) FRANCISCO BORBON
SPECIALISTS, INC. & HON. COURT OF APPEALS, respondents. Address: 73 Sterling Life Home Pamplona, Las Pias, MM
DECISION "WITNESSES
VITUG, J.: (illegible) ____(illegible)_____
From the decision of the Court of Appeals in CA-G.R. CV No. 30693 which affirmed that of the 'PAY TO THE ORDER OF
Regional Trial Court, NCJR, Branch 39, Manila, in Civil Case No. 85-29954, confirming the disputed
FILINVEST CREDIT CORPORATION
possession of a motor vehicle in favor of private respondent and ordering the payment to it by
petitioners of liquidated damages and attorney's fees, the instant appeal was interposed. without recourse, notice, presentment and demand waived
The appellate court adopted the factual findings of the court a quo, to wit: PANGASINAN AUTO MART, INC.
"The plaintiff's evidence shows among others that on December 7, 1984, defendants Daniel L. Borbon BY:
and Francisco Borbon signed a promissory note (Exh. A) which states among others as follows: (S/T) K.N. DULCE
"'PROMISSORY NOTE Dealer'
Acct. No. 115008276 "To secure the Promissory Note, the defendants executed a Chattel Mortgage (Exh. B) on
Makati, Metro Manila, 'One (1) Brand new 1984 Isuzu
Philippines KCD 20 Crew Cab (Conv.)
December 7, 1984 Serial No. KC20D0F 207685
'P122,856.00 Key No. 5509
'For value received (installment price of the chattel/s purchased), I/We jointly and severally promised (Exhs. A and B, p. 2 tsn, September 10, 1985)
to pay Pangasinan Auto Mart, Inc. or order, at its office at NMI Bldg. Buendia Avenue, Makati, MM "The rights of Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit Corporation on
the sum of One Hundred Twenty Two Thousand Eight Hundred Fifty Six only (P122,856.00), December 10, 1984, with notice to the defendants (Exh. C, p. 10, Record). 18
Philippine Currency, to be payable without need of notice or demand, in installments of the amounts "On March 21, 1985, Filinvest Credit Corporation assigned all its rights, interest and title over the
following and at the dates hereinafter set forth, to wit: P10,238.00 monthly for Twelve (12) months Promissory Note and the chattel mortgage to the plaintiff (Exh. D; p. 3, tsn, Sept. 30, 1985).
due and payable on the 7 day of each month starting January, 1985, provided that a late payment
charge of 3% per month shall be added on each unpaid installment from due date thereof until fully "The promissory note stipulates that the installment of P10,238.00 monthly should be paid on the
paid. 7th day of each month starting January 1985, but the defendants failed to comply with their
obligation (p. 3, tsn, Sept. 30, 1985).
xxx xxx xxx
"Because the defendants did not pay their monthly installments, Filinvest demanded from the
'It is further agreed that if upon such default, attorney's services are availed of, an additional sum defendants the payment of their installments due on January 29, 1985 by telegram (Exh. E; pp. 3-
equal to twenty five percent (25%) of the total sum due thereon, which shall not be less than five 4, tsn, Sept. 30, 1985).
hundred pesos, shall be paid to the holder hereof for attorney's fees plus an additional sum equivalent
to twenty five percent (25%) of the total sum due which likewise shall not be less than five hundred "After the accounts were assigned to the plaintiff, the plaintiff attempted to collect by sending a
pesos for liquidated damages, aside from expenses of collection and the legal costs provided for in demand letter to the defendants for them to pay their entire obligation which, as of March 12, 1985,
the Rules of Court. totaled P185,257.80 (Exh. H; pp. 3-4, tsn, Sept. 30, 1985).
'It is expressly agreed that all legal actions arising out of this note or in connection with the chattel(s) "For their defense, the defendants claim that what they intended to buy from Pangasinan Auto Mart
subject hereof shall only be brought in or submitted to the jurisdiction of the proper court either in was a jeepney type Isuzu K. C. Cab. The vehicle that they bought was not delivered (pp. 11-12, tsn,
the City of Manila or in the province, municipality or city where the branch of the holder hereof is Oct. 17, 1985). Instead, through misrepresentation and machination, the Pangasinan Motor, Inc.
located. delivered an Isuzu crew cab, as this is the unit available at their warehouse. Later the representative
of Pangasinan Auto Mart, Inc. (assignor) told the defendants that their available stock is an Isuzu
'Acceptance by the holder hereof of payment of any installment or any part thereof after due dated Cab but minus the rear body, which the defendants agreed to deliver with the understanding that
(sic) shall not be considered as extending the time for the payment or any of the installments the Pangasinan Auto Mart, Inc. will refund the defendants the amount of P10,000.00 to have the
aforesaid or as a modification of any of the conditions hereof. Nor shall the failure of the holder rear body completed (pp. 12-34, Exhs. 2 to 3-3A).
hereof to exercise any of its right under this note constitute or be deemed as a waiver of such rights.
"Despite Communications with the Pangasinan Auto Mart, Inc., the latter was not able to replace the
'Maker: vehicle until the vehicle delivered was seized by order of this court. The defendants argue that an
(S/t) DANIEL L. BORBON, II
assignee stands in the place of an assignor which, to the mind of the court, is correct. The assignee a deficiency liability. Thus, if the case is one for specific performance, even when this action is
exercise all the rights of the assignor (Gonzales vs. Rama Plantation Co., C.V. 08630, Dec. 2, 1986). selected after the vendee has refused to surrender the mortgaged property to permit an extrajudicial
"The defendants further claim that they are not in default of their obligation because the Pangasinan foreclosure, that property may still be levied on execution and an alias writ may be issued if the
Auto Mart was first guilty of not fulfilling its obligation in the contract. The defendants claim that proceeds thereof are insufficient to satisfy the judgment credit.[7] So, also, a mere demand to
neither party incurs delay if the other does not comply with his obligation. (citing Art. 1169, N.C.C.)"[1] surrender the object which is not heeded by the mortgagor will not amount to a foreclosure, [8] but
the repossession thereof by the vendor-mortgagee would have the effect of foreclosure.
In sustaining the decision of the court a quo, the appellate court ruled that petitioners could
not avoid liability under the promissory note and the chattel mortgage that secured it since private The parties here concede that the action for replevin has been instituted for the foreclosure of
respondent took the note for value and in good faith. the vehicle in question (now in the possession of private respondent). The sole issue raised before
us in this appeal is focused on the legal propriety of the affirmance by the appellate court of the
In their appeal to this Court, petitioners merely seek a modification of the decision of the
awards made by the court a quo of liquidated damages and attorney's fees to private
appellate court insofar as it has upheld the court a quo in the award of liquidated damages and
respondent. Petitioners hold that under Article 1484 of the Civil Code, aforequoted, the vendor-
attorney's fees in favor of private respondent. Petitioners invoke the provisions of Article 1484 of the
mortgagee or its assignees loses any right "to recover any unpaid balance of the price" and any
Civil Code which reads:
"agreement to the contrary (would be) void."
ART. 1484. In a contract of sale of personal property the price of which is payable in
The argument is aptly made. In Macondray & Co. vs. Eustaquio[9] we have said that the phrase
installments, the vendor may exercise any of the following remedies:
"any unpaid balance" can only mean the deficiency judgment to which the mortgagee may be entitled
"(1) Exact fulfillment of the obligation, should the vendee fail to pay; to when the proceeds from the auction sale are insufficient to cover the "full amount of the secured
"(2) Cancel the sale, should the vendee's failure to pay cover two or more installments; obligation which x x x include interest on the principal, attorney's fees, expenses of collection, and
"(3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the costs." In sum, we have observed that the legislative intent is not to merely limit the proscription of
vendee's failure to pay cover two or more installments. In this case, he shall have no further action any further action to the "unpaid balance of the principal" but, as so later ruled in Luneta Motor Co.
against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary vs. Salvador,[10] to all other claims that may likewise be called for in the accompanying promissory
shall be void." note against the buyer-mortgagor or his guarantor, including costs and attorney's fees.

The remedies under Article 1484 of the Civil Code are not cumulative but alternative and In Filipinas Investment & Finance Corporation vs. Ridad[11] while we reiterated and expressed
exclusive,[2] which means, as so held in Nonato vs. Intermediate Appellate Court and Investor's our agreement on the basic philosophy behind Article 1484, we stressed, nevertheless, that the
protection given to the buyer-mortgagor should not be considered to be without circumscription or 19
Finance Corporation,[3] that -
as being preclusive of all other laws or legal principles. Hence, borrowing from the examples made
"x x x Should the vendee or purchaser of a personal property default in the payment of two or more in Filipinas Investment, where the mortgagor unjustifiably refused to surrender the chattel subject
of the agreed installments, the vendor or seller has the option to avail of any of these three remedies of the mortgage upon failure of two or more installments, or if he concealed the chattel to place it
either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the beyond the reach of the mortgagee, that thereby constrained the latter to seek court relief, the
mortgage on the purchased personal property, if one was constituted. These remedies have been expenses incurred for the prosecution of the case, such as attorney's fees, could rightly be awarded.
recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the
others."[4] Private respondent bewails the instant petition in that petitioners have failed to specifically raise
the issue on liquidated damages and attorney's fees stipulated in the actionable documents. In
When the seller assigns his credit to another person, the latter is likewise bound by the same several cases, we have ruled that as long as the questioned items bear relevance and close relation
law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery to those specifically raised, the interest of justice would dictate that they, too, must be considered
of the deficiency,[5] and the seller-mortgagee is deemed to have renounced any right and resolved and that the rule that only theories raised in the initial proceedings may be taken up
thereto.[6] A contrario, in the event the seller-mortgagee first seeks, instead, the enforcement of the by a party thereto on appeal should only refer to independent, not concomitant matters, to support
additional mortgages, guarantees or other security arrangements, he must then be held to have lost or oppose the cause of action.[12]
by waiver or non-choice his lien on the chattel mortgage of the personal property sold by any
mortgaged back to him, although, similar to an action for specific performance, he may still levy on Given the circumstances, we must strike down the award for liquidated damages made by the
it. court a quo but we uphold the grant of attorney's fees which we, like the appellate court, find to be
reasonable.Parenthetically, while the promissory note may appear to have been a negotiable
In ordinary alternative obligations, a mere choice categorically and unequivocally made and instrument, private respondent, however, clearly cannot claim unawareness of its accompanying
then communicated by the person entitled to exercise the option concludes the parties. The creditor documents so as to thereby gain a right greater than that of the assignor.
may not thereafter exercise any other option, unless the chosen alternative proves to be ineffectual
or unavailing due to no fault on his part. This rule, in essence, is the difference between alternative WHEREFORE, the appealed decision is MODIFIED by deleting therefrom the award for
obligations, on the one hand, and alternative remedies, upon the other hand, where, in the latter liquidated damages; in all other respects the judgment of the appellate court is AFFIRMED. No cost.
case, the choice generally becomes conclusive only upon the exercise of the remedy. For instance, SO ORDERED.
in one of the remedies expressed in Article 1484 of the Civil Code, it is only when there has been a
foreclosure of the chattel mortgage that the vendee-mortgagor would be permitted to escape from
Republic of the Philippines In order to compel defendant to accept plaintiffs’ payment in full satisfaction of the purchase price
SUPREME COURT and, thereafter, execute the necessary document of transfer in their favor, plaintiffs filed before the
Manila RTC a complaint for specific performance.
SECOND DIVISION In their complaint, plaintiffs alleged that they discovered the infirmity of the Deed of Absolute Sale
G.R. No. 172036 April 23, 2010 covering Lot Nos. 2776, 2767 and 2769, between their former owner Angel Abelida and defendant,
the same being spurious because the signature of Angel Abelida and his wife were falsified; that at
SPOUSES FAUSTINO AND JOSEFINA GARCIA, SPOUSES MELITON GALVEZ AND HELEN
the time of the execution of the said deed, said spouses were in the United States; that due to their
GALVEZ, and CONSTANCIA ARCAIRA represented by their Attorney-in-Fact JULIANA O.
apprehension regarding the authenticity of the document, they withheld payment of the last
MOTAS, Petitioners,
installment which was supposedly due on December 31, 1993; that they tendered payment of the
vs.
unpaid balance sometime in July 1995, after Angel Abelida ratified the sale made in favor [of]
COURT OF APPEALS, EMERLITA DE LA CRUZ, and DIOGENES G.
defendant, but defendant refused to accept their payment for no jusitifiable reason.
BARTOLOME, Respondents.
In her answer, defendant denied the allegation that the Deed of Absolute Sale was spurious and
DECISION
argued that plaintiffs failed to pay in full the agreed purchase price on its due date despite repeated
CARPIO, J.: demands; that the Contract to Sell contains a proviso that failure of plaintiffs to pay the purchase
G.R. No. 172036 is a petition for review1 assailing the Decision2 promulgated on 25 January 2006 as price in full shall cause the rescission of the contract and forfeiture of one-half (1/2%) percent of the
well as the Resolution3 promulgated on 16 March 2006 of the Court of Appeals (appellate court) in total amount paid to defendant; that a notarized letter stating the indended rescission of the contract
CA-G.R. CV No. 63651. The appellate court reversed and set aside the decision of Branch 23 of the to sell and forfeiture of payments was sent to plaintiffs at their last known address but it was returned
Regional Trial Court of Trece Martires City, Cavite (trial court) in Civil Case No. TM-622. The appellate with a notation "insufficient address."
court ordered Emerlita Dela Cruz (Dela Cruz) to return to spouses Faustino and Josefina Garcia, Intervenor Diogenes G. Bartolome filed a complaint in intervention alleging that the Contract to Sell
spouses Meliton and Helen Galvez, and Constancia Arcaira (collectively, petitioners) the amount in dated May 31, 1993 between plaintiffs and defendant was rescinded and became ineffective due to
excess of one-half percent of ₱1,500,000. Dela Cruz’s co-defendant, Diogenes Bartolome unwarranted failure of the plaintiffs to pay the unpaid balance of the purchase price on or before the
(Bartolome), did not incur any liability. stipulated date; that he became interested in the subject parcels of land because of their clean titles;
The appellate court narrated the facts as follows: that he purchased the same from defendant by virtue of an Absolute Deed of Sale executed on
September 23, 1995 in consideration of the sum of Seven Million Seven Hundred Ninety Three 20
On May 28, 1993, plaintiffs spouses Faustino and Josefina Garcia and spouses Meliton and Helen
Galvez (herein appellees) and defendant Emerlita dela Cruz (herein appellant) entered into a Contract Thousand (₱7,793,000.00) Pesos.4
to Sell wherein the latter agreed to sell to the former, for Three Million One Hundred Seventy The Decision of the Trial Court
Thousand Two Hundred Twenty (₱3,170,220.00) Pesos, five (5) parcels of land situated at Tanza, In its Decision dated 15 April 1999, the trial court ruled that Dela Cruz’s rescission of the contract
Cavite particularly known as Lot Nos. 47, 2768, 2776, 2767, 2769 and covered by Transfer Certificate was not valid. The trial court applied Republic Act No. 6552 (Maceda Law) and stated that Dela Cruz
of Title Nos. T-340674, T-340673, T-29028, T-29026, T-29027, respectively. At the time of the is not allowed to unilaterally cancel the Contract to Sell. The trial court found that petitioners are
execution of the said contract, three of the subject lots, namely, Lot Nos. 2776, 2767, and 2769 were justified in withholding the payment of the balance of the consideration because of the alleged
registered in the name of one Angel Abelida from whom defendant allegedly acquired said properties spurious sale between Angel Abelida and Emerlita Dela Cruz. Moreover, intervenor Diogenes
by virtue of a Deed of Absolute Sale dated March 31, 1989. Bartolome (Bartolome) is not a purchaser in good faith because he was aware of petitioners’ interest
As agreed upon, plaintiffs shall make a down payment of Five Hundred Thousand (₱500,000.00) in the subject parcels of land.
Pesos upon signing of the contract. The balance of Two Million Six Hundred Seventy Thousand Two The dispositive portion of the trial court’s decision reads:
Hundred Twenty (₱2,670,220.00) Pesos shall be paid in three installments, viz: Five Hundred
ACCORDINGLY, defendant Emerlita dela Cruz is ordered to accept the balance of the purchase price
Thousand (₱500,000.00) Pesos on June 30, 1993; Five Hundred Thousand (₱500,000.00) Pesos on
in the amount of ₱1,670,220.00 within ten (10) days after the judgment of this Court in the above-
August 30, 1993; One Million Six Hundred Seventy Thousand Two Hundred Twenty (₱1,670,220.00)
entitled case has become final and executory and to execute immediately the final deed of sale in
Pesos on December 31, 1993.
favor of plaintiffs.
On its due date, December 31, 1993, plaintiffs failed to pay the last installment in the amount of One
Defendant is further directed to pay plaintiffs the amount of ₱400,000.00 as moral damages and
Million Six Hundred Seventy Thousand Two Hundred Twenty (₱1,670,220.00) Pesos. Sometime in
₱100,000.00 as exemplary damages.
July 1995, plaintiffs offered to pay the unpaid balance, which had already been delayed by one and
[a] half year, which defendant refused to accept. On September 23, 1995, defendant sold the same The deed of sale executed by defendant Emerlita dela Cruz in favor of Atty. Diogenes Bartolome is
parcels of land to intervenor Diogenes G. Bartolome for Seven Million Seven Hundred Ninety Three declared null and void and the amount of ₱7,793,000.00 which was paid by intervenor Bartolome to
Thousand (₱7,793,000.00) Pesos. Emerlita dela Cruz as the consideration of the sale of the five (5) parcels of land is hereby directed
to be returned by Emerlita dela Cruz to Atty. Diogenes Bartolome within ten (10) days from the
finality of judgment.
Further, defendant is directed to pay plaintiff the sum of ₱100,000.00 as attorney’s fees. It is hereby agreed and covenanted that possession shall be retained by the VENDOR until a Deed
SO ORDERED.5 of Absolute Sale shall be executed by her in favor of the Vendees. Violation of this provision shall
authorize/empower the VENDOR [to] demolish any construction/improvement without need of
Dela Cruz and Bartolome appealed from the judgment of the trial court.
judicial action or court order.
The Decision of the Appellate Court
That upon and after the full payment of the balance, a Deed of Absolute Sale shall be executed by
The appellate court reversed the trial court’s decision and dismissed Civil Case No. TM-622. Dela the Vendor in favor of the Vendees.
Cruz’s obligation under the Contract to Sell did not arise because of petitioners’ undue failure to pay
That the duplicate original of the owner’s copy of the Transfer Certificate of Title of the above subject
in full the agreed purchase price on the stipulated date. Moreover, judicial action for the rescission
parcels of land shall remain in the possession of the Vendor until the execution of the Deed of
of a contract is not necessary where the contract provides that it may be revoked and cancelled for
Absolute Sale.9
violation of any of its terms and conditions. The dispositive portion of the appellate court’s decision
reads: Contracts are law between the parties, and they are bound by its stipulations. It is clear from the
above-quoted provisions that the parties intended their agreement to be a Contract to Sell: Dela Cruz
WHEREFORE, in view of all the foregoing, the appealed decision of the Regional Trial Court is hereby
retains ownership of the subject lands and does not have the obligation to execute a Deed of Absolute
REVERSED and SET ASIDE and Civil Case No. TM-622 is, consequently, DISMISSED. Defendant is
Sale until petitioners’ payment of the full purchase price. Payment of the price is a positive suspensive
however ordered to return to plaintiffs the amount in excess of one-half (1/2%) percent of One
condition, failure of which is not a breach but an event that prevents the obligation of the vendor to
Million Five Hundred Thousand (₱1,500,000.00) Pesos which was earlier paid by plaintiffs.
convey title from becoming effective. Strictly speaking, there can be no rescission or resolution of an
SO ORDERED.6 obligation that is still non-existent due to the non-happening of the suspensive condition.10 Dela Cruz
The appellate court likewise resolved to deny petitioners’ Motion for Reconsideration for lack of is thus not obliged to execute a Deed of Absolute Sale in petitioners’ favor because of petitioners’
merit.7 failure to make full payment on the stipulated date.
Hence, this petition. We ruled thus in Pangilinan v. Court of Appeals:11
Issues Article 1592 of the New Civil Code, requiring demand by suit or by notarial act in case the vendor of
Petitioners raised the following grounds for the grant of their petition: realty wants to rescind does not apply to a contract to sell but only to contract of sale. In contracts
to sell, where ownership is retained by the seller and is not to pass until the full payment, such
I. The Honorable Court of Appeals erred when it failed to consider the provisions of Republic payment, as we said, is a positive suspensive condition, the failure of which is not a breach, casual 21
Act 6552, otherwise known as the Maceda Law. or serious, but simply an event that prevented the obligation of the vendor to convey title from
II. The Honorable Court of Appeals erred when it failed to consider that Respondent Dela acquiring binding force. To argue that there was only a casual breach is to proceed from the
Cruz could not pass title over the three (3) properties at the time she entered to a Contract assumption that the contract is one of absolute sale, where non-payment is a resolutory condition,
to Sell as her purported ownership was tainted with fraud, thereby justifying Petitioners which is not the case.
Spouses Garcia, Spouses Galvez and Arcaira’s suspension of payment. The applicable provision of law in instant case is Article 1191 of the New Civil Code which provides
III. The Honorable Court of Appeals gravely erred when it failed to consider that Respondent as follows:
Dela Cruz’s "rescission" was done in evident bad faith and malice on account of a second Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
sale she entered with Respondent Bartolome for a much bigger amount. should not comply with what is incumbent upon him.
IV. The Honorable Court of Appeals erred when it failed to declare Respondent Bartolome The injured party may choose between the fulfillment and the rescission of the obligation, with the
is not an innocent purchaser for value despite the presence of evidence as to his bad faith.8 payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment,
The Court’s Ruling if the latter should become impossible.
The petition has no merit. The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
Both parties admit the following: (1) the contract between petitioners and Dela Cruz was a contract period.
to sell; (2) petitioners failed to pay in full the agreed purchase price of the subject property on the This is understood to be without prejudice to the rights of third persons who have acquired the thing,
stipulated date; and (3) Dela Cruz did not want to accept petitioners’ offer of payment and did not in accordance with Articles 1385 and 1388 and the Mortgage Law. (1124)
want to execute a document of transfer in petitioners’ favor. Pursuant to the above, the law makes it available to the injured party alternative remedies such as
The pertinent provisions of the contract, denominated Contract to Sell, between the parties read: the power to rescind or enforce fulfillment of the contract, with damages in either case if the obligor
Failure on the part of the vendees to comply with the herein stipulation as to the terms of payment does not comply with what is incumbent upon him. There is nothing in this law which prohibits the
shall cause the rescission of this contract and the payments made shall be returned to the vendees parties from entering into an agreement that a violation of the terms of the contract would cause its
subject however, to forfeiture in favor of the Vendor equivalent to 1/2% of the total amount paid. cancellation even without court intervention. The rationale for the foregoing is that in contracts
providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a
xxx
judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement
providing for rescission even without judicial intervention, but in order to determine whether or not
the rescission was proper. Where such propriety is sustained, the decision of the court will be merely
declaratory of the revocation, but it is not in itself the revocatory act. Moreover, the vendor’s right
in contracts to sell with reserved title to extrajudicially cancel the sale upon failure of the vendee to
pay the stipulated installments and retain the sums and installments already received has long been
recognized by the well-established doctrine of 39 years standing. The validity of the stipulation in
the contract providing for automatic rescission upon non-payment cannot be doubted. It is in the
nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach
without need of going to court. Thus, rescission under Article 1191 was inevitable due to petitioners’
failure to pay the stipulated price within the original period fixed in the agreement.
Petitioners justify the delay in payment by stating that they had notice that Dela Cruz is not the
owner of the subject land, and that they took pains to rectify the alleged defect in Dela Cruz’s title.
Be that as it may, Angel Abelida’s (Abelida) affidavit12 confirming the sale to Dela Cruz only serves
to strengthen Dela Cruz’s claim that she is the absolute owner of the subject lands at the time the
Contract to Sell between herself and petitioners was executed. Dela Cruz did not conceal from
petitioners that the title to Lot Nos. 2776, 2767 and 2769 still remained under Abelida’s
name, and the Contract to Sell13 even provided that petitioners should shoulder
the attendant expenses for the transfer of ownership from Abelida to Dela Cruz.
The trial court erred in applying R.A. 6552,14 or the Maceda Law, to the present case. The Maceda
Law applies to contracts of sale of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial buildings and sales to tenants.
The subject lands, comprising five (5) parcels and aggregating 69,028 square meters, do not
comprise residential real estate within the contemplation of the Maceda Law.15 Moreover, even if we
apply the Maceda Law to the present case, petitioners’ offer of payment to Dela Cruz was made a 22
year and a half after the stipulated date. This is beyond the sixty-day grace period under Section 4
of the Maceda Law.16 Petitioners still cannot use the second sentence of Section 4 of the Maceda
Law against Dela Cruz for Dela Cruz’s alleged failure to give an effective notice of cancellation or
demand for rescission because Dela Cruz merely sent the notice to the address supplied by
petitioners in the Contract to Sell.
It is undeniable that petitioners failed to pay the balance of the purchase price on the stipulated date
of the Contract to Sell. Thus, Dela Cruz is within her rights to sell the subject lands to Bartolome.
Neither Dela Cruz nor Bartolome can be said to be in bad faith.
WHEREFORE, we DENY the petition. We AFFIRM in toto the Court of Appeals’ Decision
promulgated on 25 January 2006 as well as the Resolution promulgated on 16 March 2006 in CA-
G.R. CV No. 63651.
Costs against petitioners.
Republic of the Philippines Respondent also averred that on September 14, 1981, she and Patricio signed an agreement (Exh.
SUPREME COURT 2) whereby he consented to the suspension of respondent’s monthly payments until December 1981.
Manila However, even before the lapse of said period, Patricio resumed demolishing respondent’s house,
FIRST DIVISION prompting her to lodge a complaint with the Barangay Captain who advised her that she could
continue suspending payment even beyond December 31, 1981 until Patricio returned all the
G.R. No. 147695 September 13, 2007
materials he took from her house. This Patricio failed to do until his death.
MANUEL C. PAGTALUNAN, petitioner,
Respondent did not deny that she still owed Patricio P5,650, but claimed that she did not resume
vs.
paying her monthly installment because of the unlawful acts committed by Patricio, as well as the
RUFINA DELA CRUZ VDA. DE MANZANO, respondent.
filing of the ejectment case against her. She denied having any knowledge of the Kasunduan of
DECISION November 18, 1979.
AZCUNA, J.: Patricio and his wife died on September 17, 1992 and on October 17, 1994, respectively. Petitioner
This is a petition for review on certiorari under Rule 45 of the Rules of Court of the Court of Appeals’ became their sole successor-in-interest pursuant to a waiver by the other heirs. On March 5, 1997,
(CA) Decision promulgated on October 30, 2000 and its Resolution dated March 23, 2001 denying respondent received a letter from petitioner’s counsel dated February 24, 1997 demanding that she
petitioner’s motion for reconsideration. The Decision of the CA affirmed the Decision of the Regional vacate the premises within five days on the ground that her possession had become unlawful.
Trial Court (RTC) of Malolos, Bulacan, dated June 25, 1999 dismissing the case of unlawful detainer Respondent ignored the demand. The Punong Barangay failed to settle the dispute amicably.
for lack of merit. On April 8, 1997, petitioner filed a Complaint for unlawful detainer against respondent with the
The facts are as follows: Municipal Trial Court (MTC) of Guiguinto, Bulacan praying that, after hearing, judgment be rendered
On July 19, 1974, Patricio Pagtalunan (Patricio), petitioner’s stepfather and predecessor-in-interest, ordering respondent to immediately vacate the subject property and surrender it to petitioner;
entered into a Contract to Sell with respondent, wife of Patricio’s former mechanic, Teodoro Manzano, forfeiting the amount of P12,950 in favor of petitioner as rentals; ordering respondent to pay
whereby the former agreed to sell, and the latter to buy, a house and lot which formed half of a petitioner the amount of P3,000 under the Kasunduan and the amount of P500 per month from
parcel of land, covered by Transfer Certificate of Title (TCT) No. T-10029 (now TCT No. RT59929 January 1980 until she vacates the property, and to pay petitioner attorney’s fees and the costs.
[T-254773]), with an area of 236 square meters. The consideration of P17,800 was agreed to be On December 22, 1998, the MTC rendered a decision in favor of petitioner. It stated that although
paid in the following manner: P1,500 as downpayment upon execution of the Contract to Sell, and the Contract to Sell provides for a rescission of the agreement upon failure of the vendee to pay any 23
the balance to be paid in equal monthly installments of P150 on or before the last day of each month installment, what the contract actually allows is properly termed a resolution under Art. 1191 of the
until fully paid. Civil Code.
It was also stipulated in the contract that respondent could immediately occupy the house and lot; The MTC held that respondent’s failure to pay not a few installments caused the resolution or
that in case of default in the payment of any of the installments for 90 days after its due date, the termination of the Contract to Sell. The last payment made by respondent was on January 9, 1980
contract would be automatically rescinded without need of judicial declaration, and that all payments (Exh. 71). Thereafter, respondent’s right of possession ipso facto ceased to be a legal right, and
made and all improvements done on the premises by respondent would be considered as rentals for became possession by mere tolerance of Patricio and his successors-in-interest. Said tolerance
the use and occupation of the property or payment for damages suffered, and respondent was ceased upon demand on respondent to vacate the property.
obliged to peacefully vacate the premises and deliver the possession thereof to the vendor. The dispositive portion of the MTC Decision reads:
Petitioner claimed that respondent paid only P12,950. She allegedly stopped paying after December Wherefore, all the foregoing considered, judgment is hereby rendered, ordering the
1979 without any justification or explanation. Moreover, in a "Kasunduan"1 dated November 18, defendant:
1979, respondent borrowed P3,000 from Patricio payable in one year either in one lump sum
a. to vacate the property covered by Transfer Certificate of Title No. T-10029 of
payment or by installments, failing which the balance of the loan would be added to the principal
the Register of Deeds of Bulacan (now TCT No. RT-59929 of the Register of Deeds
subject of the monthly amortizations on the land.
of Bulacan), and to surrender possession thereof to the plaintiff;
Lastly, petitioner asserted that when respondent ceased paying her installments, her status of buyer
b. to pay the plaintiff the amount of P113,500 representing rentals from January
was automatically transformed to that of a lessee. Therefore, she continued to possess the property
1980 to the present;
by mere tolerance of Patricio and, subsequently, of petitioner.
c. to pay the plaintiff such amount of rentals, at P500/month, that may become
On the other hand, respondent alleged that she paid her monthly installments religiously, until
due after the date of judgment, until she finally vacates the subject property;
sometime in 1980 when Patricio changed his mind and offered to refund all her payments provided
she would surrender the house. She refused. Patricio then started harassing her and began d. to pay to the plaintiff the amount of P25,000 as attorney’s fees.
demolishing the house portion by portion. Respondent admitted that she failed to pay some SO ORDERED.2
installments after December 1979, but that she resumed paying in 1980 until her balance dwindled On appeal, the RTC of Malolos, Bulacan, in a Decision dated June 25, 1999, reversed the decision of
to P5,650. She claimed that despite several months of delay in payment, Patricio never sued for the MTC and dismissed the case for lack of merit. According to the RTC, the agreement could not be
ejectment and even accepted her late payments.
automatically rescinded since there was delivery to the buyer. A judicial determination of rescission There is nothing in the Maceda Law, petitioner asserts, which gives the buyer a right to pay
must be secured by petitioner as a condition precedent to convert the possession de facto of arrearages after the grace periods have lapsed, in the event of an invalid demand for rescission. The
respondent from lawful to unlawful. Maceda Law only provides that actual cancellation shall take place after 30 days from receipt of the
The dispositive portion of the RTC Decision states: notice of cancellation or demand for rescission and upon full payment of the cash surrender value to
the buyer.
WHEREFORE, judgment is hereby rendered reversing the decision of the Municipal Trial
Court of Guiguinto, Bulacan and the ejectment case instead be dismissed for lack of merit.3 Petitioner contends that his demand letter dated February 24, 1997 should be considered the notice
of cancellation since the demand letter informed respondent that she had "long ceased to have any
The motion for reconsideration and motion for execution filed by petitioner were denied by the RTC
right to possess the premises in question due to [her] failure to pay without justifiable cause." In
for lack of merit in an Order dated August 10, 1999.
support of his contention, he cited Layug v. Intermediate Appellate Court8 which held that "the
Thereafter, petitioner filed a petition for review with the CA. additional formality of a demand on [the seller’s] part for rescission by notarial act would appear, in
In a Decision promulgated on October 30, 2000, the CA denied the petition and affirmed the Decision the premises, to be merely circuitous and consequently superfluous." He stated that in Layug, the
of the RTC. The dispositive portion of the Decision reads: seller already made a written demand upon the buyer.
WHEREFORE, the petition for review on certiorari is Denied. The assailed Decision of the In addition, petitioner asserts that whatever cash surrender value respondent is entitled to have
Regional Trial Court of Malolos, Bulacan dated 25 June 1999 and its Order dated 10 August been applied and must be applied to rentals for her use of the house and lot after December, 1979
1999 are hereby AFFIRMED. or after she stopped payment of her installments.
SO ORDERED. 4 Petitioner argues that assuming Patricio accepted respondent’s delayed installments in 1981, such
The CA found that the parties, as well as the MTC and RTC failed to advert to and to apply Republic act cannot prevent the cancellation of the Contract to Sell. Installments after 1981 were still unpaid
Act (R.A.) No. 6552, more commonly referred to as the Maceda Law, which is a special law enacted and the applicable grace periods under the Maceda Law on the unpaid installments have long lapsed.
in 1972 to protect buyers of real estate on installment payments against onerous and oppressive Respondent cannot be allowed to hide behind the Maceda Law. She acted with bad faith and must
conditions. bear the consequences of her deliberate withholding of and refusal to make the monthly payments.

The CA held that the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. Petitioner also contends that the applicability of the Maceda Law was never raised in the proceedings
No. 6552, and recognized respondent’s right to continue occupying unmolested the property subject below; hence, it should not have been applied by the CA in resolving the case.
of the contract to sell. The Court is not persuaded. 24
The CA denied petitioner’s motion for reconsideration in a Resolution dated March 23, 2001. The CA correctly ruled that R.A No. 6552, which governs sales of real estate on installment, is
Hence, this petition for review on certiorari. applicable in the resolution of this case.

Petitioner contends that: This case originated as an action for unlawful detainer. Respondent is alleged to be illegally
withholding possession of the subject property after the termination of the Contract to Sell between
A. Respondent Dela Cruz must bear the consequences of her deliberate withholding of, and Patricio and respondent. It is, therefore, incumbent upon petitioner to prove that the Contract to Sell
refusal to pay, the monthly payment. The Court of Appeals erred in allowing Dela Cruz who had been cancelled in accordance with R.A. No. 6552.
acted in bad faith from benefiting under the Maceda Law.
The pertinent provision of R.A. No. 6552 reads:
B. The Court of Appeals erred in resolving the issue on the applicability of the Maceda Law,
which issue was not raised in the proceedings a quo. Sec. 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
C. Assuming arguendo that the RTC was correct in ruling that the MTC has no jurisdiction industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
over a rescission case, the Court of Appeals erred in not remanding the case to the RTC for Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three hundred
trial.5 eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled
Petitioner submits that the Maceda Law supports and recognizes the right of vendors of real estate to the following rights in case he defaults in the payment of succeeding installments:
to cancel the sale outside of court, without need for a judicial declaration of rescission, citing Luzon (a) To pay, without additional interest, the unpaid installments due within the total grace
Brokerage Co., Inc., v. Maritime Building Co., Inc.6 period earned by him, which is hereby fixed at the rate of one month grace period for every
Petitioner contends that respondent also had more than the grace periods provided under the Maceda one year of installment payments made: Provided, That this right shall be exercised by the
Law within which to pay. Under Sec. 37 of the said law, a buyer who has paid at least two years of buyer only once in every five years of the life of the contract and its extensions, if any.
installments has a grace period of one month for every year of installment paid. Based on the amount (b) If the contract is cancelled, the seller shall refund to the buyer the cash
of P12,950 which respondent had already paid, she is entitled to a grace period of six months within surrender value of the payments on the property equivalent to fifty percent of the
which to pay her unpaid installments after December, 1979. Respondent was given more than six total payments made and, after five years of installments, an additional five percent every
months from January 1980 within which to settle her unpaid installments, but she failed to do so. year but not to exceed ninety percent of the total payments made: Provided, That the
Petitioner’s demand to vacate was sent to respondent in February 1997. actual cancellation of the contract shall take place after thirty days from receipt
by the buyer of the notice of cancellation or the demand for rescission of the There being no valid cancellation of the Contract to Sell, the CA correctly recognized respondent’s
contract by a notarial act and upon full payment of the cash surrender value to right to continue occupying the property subject of the Contract to Sell and affirmed the dismissal of
the buyer.9 the unlawful detainer case by the RTC.
R.A. No. 6552, otherwise known as the "Realty Installment Buyer Protection Act," recognizes in The Court notes that this case has been pending for more than ten years. Both parties prayed for
conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller other reliefs that are just and equitable under the premises. Hence, the rights of the parties over the
to cancel the contract upon non-payment of an installment by the buyer, which is simply an event subject property shall be resolved to finally dispose of that issue in this case.
that prevents the obligation of the vendor to convey title from acquiring binding force. 10 The Court Considering that the Contract to Sell was not cancelled by the vendor, Patricio, during his lifetime or
agrees with petitioner that the cancellation of the Contract to Sell may be done outside the court by petitioner in accordance with R.A. No. 6552 when petitioner filed this case of unlawful detainer
particularly when the buyer agrees to such cancellation. after 22 years of continuous possession of the property by respondent who has paid the substantial
However, the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of R.A. amount of P12,300 out of the purchase price of P17,800, the Court agrees with the CA that it is only
No. 6552, which requires a notarial act of rescission and the refund to the buyer of the full payment right and just to allow respondent to pay her arrears and settle the balance of the purchase price.
of the cash surrender value of the payments on the property. Actual cancellation of the contract For respondent’s delay in the payment of the installments, the Court, in its discretion, and applying
takes place after 30 days from receipt by the buyer of the notice of cancellation or the demand for Article 220914 of the Civil Code, may award interest at the rate of 6% per annum 15 on the unpaid
rescission of the contract by a notarial act and upon full payment of the cash surrender value to the balance considering that there is no stipulation in the Contract to Sell for such interest. For purposes
buyer. of computing the legal interest, the reckoning period should be the filing of the complaint for unlawful
Based on the records of the case, the Contract to Sell was not validly cancelled or rescinded under detainer on April 8, 1997.
Sec. 3 (b) of R.A. No. 6552. Based on respondent’s evidence16 of payments made, the MTC found that respondent paid a total
First, Patricio, the vendor in the Contract to Sell, died on September 17, 1992 without canceling the of P12,300 out of the purchase price of P17,800. Hence, respondent still has a balance of P5,500,
Contract to Sell. plus legal interest at the rate of 6% per annum on the unpaid balance starting April 8, 1997.
Second, petitioner also failed to cancel the Contract to Sell in accordance with law. The third issue is disregarded since petitioner assails an inexistent ruling of the RTC on the lack of
Petitioner contends that he has complied with the requirements of cancellation under Sec. 3 (b) of jurisdiction of the MTC over a rescission case when the instant case he filed is for unlawful detainer.
R.A. No. 6552. He asserts that his demand letter dated February 24, 1997 should be considered as WHEREFORE, the Decision of the Court of Appeals dated October 30, 2000 sustaining the dismissal
the notice of cancellation or demand for rescission by notarial act and that the cash surrender value of the unlawful detainer case by the RTC is AFFIRMED with the following MODIFICATIONS: 25
of the payments on the property has been applied to rentals for the use of the house and lot after 1. Respondent Rufina Dela Cruz Vda. de Manzano shall pay petitioner Manuel C. Pagtalunan
respondent stopped payment after January 1980. the balance of the purchase price in the amount of Five Thousand Five Hundred Pesos
The Court, however, finds that the letter11 dated February 24, 1997, which was written by petitioner’s (P5,500) plus interest at 6% per annum from April 8, 1997 up to the finality of this
counsel, merely made formal demand upon respondent to vacate the premises in question within judgment, and thereafter, at the rate of 12% per annum;
five days from receipt thereof since she had "long ceased to have any right to possess the premises 2. Upon payment, petitioner Manuel C. Pagtalunan shall execute a Deed of Absolute Sale of
x x x due to [her] failure to pay without justifiable cause the installment payments x x x." the subject property and deliver the certificate of title in favor of respondent Rufina Dela
Clearly, the demand letter is not the same as the notice of cancellation or demand for rescission by Cruz Vda. de Manzano; and
a notarial actrequired by R.A No. 6552. Petitioner cannot rely on Layug v. Intermediate Appellate 3. In case of failure to pay within 60 days from finality of this Decision, respondent Rufina
Court12 to support his contention that the demand letter was sufficient compliance. Layug held that Dela Cruz Vda. de Manzano shall immediately vacate the premises without need of further
"the additional formality of a demand on [the seller’s] part for rescission by notarial act would appear, demand, and the downpayment and installment payments of P12,300 paid by her shall
in the premises, to be merely circuitous and consequently superfluous" since the seller therein filed constitute rental for the subject property.
an action for annulment of contract, which is a kindred concept of rescission by notarial
No costs.
act.13 Evidently, the case of unlawful detainer filed by petitioner does not exempt him from complying
with the said requirement. SO ORDERED.
In addition, Sec. 3 (b) of R.A. No. 6552 requires refund of the cash surrender value of the payments
on the property to the buyer before cancellation of the contract. The provision does not provide a
different requirement for contracts to sell which allow possession of the property by the buyer upon
execution of the contract like the instant case. Hence, petitioner cannot insist on compliance with
the requirement by assuming that the cash surrender value payable to the buyer had been applied
to rentals of the property after respondent failed to pay the installments due.
G.R. No. 112733 October 24, 1997 Examinations conducted on the records of said lots revealed that you once contracted to
PEOPLE'S INDUSTRIAL AND COMMERCIAL CORPORATION, petitioner, purchase said lots but your contracts were cancelled for non-payment of the stipulated
vs. installments.
COURT OF APPEALS and MAR-ICK INVESTMENT CORPORATION, respondents. Desirous of maintaining good and neighborly relations with you, we caused to send you this
ROMERO, J.: formal demand for you to remove your said wall within fifteen (15) days from your receipt
hereof, otherwise, much to our regret, we shall be constrained to seek redress before the
This petition for review on certiorari of the Decision1 of the Court of Appeals arose from the complaint
Courts and at the same time charge you with reasonable rentals for the use of said lots at
for accion publiciana de posesion over several subdivision lots that was premised on the automatic
the rate of One (P1.00) Peso per square meter per month until you shall have finally
cancellation of the contracts to sell those lots.
removed said wall.6
Private respondent Mar-ick Investment Corporation is the exclusive and registered owner of Mar-ick
Private respondent reiterated its protest against the encroachment in a letter dated February 16,
Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private respondent entered into six (6)
1981.7 It added that petitioner had failed to abide by its promise to remove the encroachment, or to
agreements with petitioner People's Industrial and Commercial Corporation whereby it agreed to sell
purchase the lots involved "at the current price or pay the rentals on the basis of the total area
to petitioner six (6) subdivision lots.2Except for Lot No. 8 that has an area of 253 square meters, all
occupied, all within a short period of time." It also demanded the removal of the illegal constructions
the lots measure 240 square meters each. Five of the agreements, involving Lots Nos. 3, 4, 5, 6 and
on the property that had prejudiced the subdivision and its neighbors.
7, similarly stipulate that the petitioner agreed to pay private respondent for each lot, the amount of
P7,333.20 with a down payment of P480.00. The balance of P6,853.20 shall be payable in 120 equal After a series of negotiations between the parties, they agreed to enter into a new contract to
monthly installments of P57.11 every 30th of the month, for a period of ten years. With respect to sell8 involving seven (7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8, with a total area of 1,693
Lot No. 8, the parties agreed to the purchase price of P7,730.00 with a down payment of P506.00 square meters. The contract stipulates that the previous contracts involving the same lots (actually
and equal monthly installments of P60.20. minus Lot No. 2) "have been cancelled due to the failure of the PURCHASER to pay the stipulated
installments." It states further that the new contract was entered into "to avoid litigation, considering
All the agreements have the following provisions:
that the PURCHASER has already made use of the premises since 1981 to the present without paying
9. Should the PURCHASER fail to make the payment of any of the monthly installments as the stipulated installments." The parties agreed that the contract price would be P423,250.00 with a
agreed herein, within One Hundred Twenty (120) days from its due date, this contract shall, down payment of P42,325.00 payable upon the signing of the contract and the balance of
by the mere fact of nonpayment, expire by itself and become null and void without necessity P380,925.00 payable in forty-eight (48) equal monthly amortization payments of P7,935.94.
of notice to the PURCHASER or of any judicial declaration to the effect, and any and all 26
The new contract bears the date of October 11, 1983 but neither of the parties signed it. Thereafter,
sums of money paid under this contract shall be considered and become rentals on the
Tomas Siatianum issued the following checks in the total amount of P37,642.72 to private
property, and in this event, the PURCHASER should he/she be in possession of the property
respondent: (a) dated March 4, 1984 for P10,000.00; (b) dated March 31, 1984 for P10,000.00; (c)
shall become a mere intruder or unlawful detainer of the same and may be ejected
dated April 30, 1984 for P10,000.00; (d) dated May 31, 1984 for P7,079.00, and (e) dated May 31,
therefrom by the means provided by law for trespassers or unlawful detainers. Immediately
1984 for P563.72.9
after the expiration of the 120 days provided for in this clause, the OWNER shall be at liberty
to dispose of and sell said parcel of land to any other person in the same manner as if this Private respondent received but did not encash those checks. Instead, on July 12, 1984 it filed in the
contract had never been executed or entered into. Regional Trial Court of Antipolo, Rizal, a complaint for accion publiciana de posesion against
petitioner and Tomas Siatianum, as president and majority stockholder of petitioner.10 It prayed that
The breach by the PURCHASER of any of the conditions considered herein shall have the
petitioner be ordered to remove the wall on the premises and to surrender possession of Lots Nos.
same effect as non-payment of the installments of the purchase price.
2 to 8 of Block 11 of the Mar-ick Subdivision, and that petitioner and Tomas Siatianum be ordered
In any of the above cases the PURCHASER authorizes the OWNER or her representatives to pay: (a) P259,074.00 as reasonable rentals for the use of the lots from 1961, "plus P1,680.00 per
to enter into the property to take possession of the same and take whatever action is month from July 1, 1984 up to and until the premises shall have been vacated and the wall
necessary or advisable to protect its rights and interests in the property, and nothing that demolished"; (b) P10,000.00 as attorney's fees; (c) moral and exemplary damages, and (d) costs of
may be done or made by the PURCHASER shall be considered as revoking this authority or suit. In the alternative, the complaint prayed that should the agreements be deemed not
a denial thereof.3 automatically cancelled, the same agreements should be declared null and void.
After the lapse of ten years, however, petitioner still had not fully paid for the six lots; it had paid In due course, the lower court11 rendered a decision finding that the original agreements of the
only the down payment and eight (8) installments, even after private respondent had given petitioner parties were validly cancelled in accordance with provision No. 9 of each agreement. The parties did
a grace period of four months to pay the arrears.4 As of May 1, 1980, the total amount due to private not enter into a new contract in accordance with Art. 1403 (2) of the Civil Code as the parties did
respondent under the contract was P214,418.00.5 not sign the draft contract. Receipt by private respondent of the five checks could not amount to
In his letter of March 30, 1980 to Mr. Tomas Siatianum (Siatianun) who signed the agreements for perfection of the contract because private respondent never encashed and benefited from those
petitioner, private respondent's counsel protested petitioner's encroachment upon a portion of its checks. Furthermore, there was no meeting of the minds between the parties because Art. 475 of
subdivision particularly Lots Nos. 2, 3, 4, 5, 6, 7 and 8. A portion of the letter reads: the Civil Code should be read with the Statute of Frauds that requires the embodiment of the contract
in a note or memorandum.
The lower court opined that the checks represented the deposit under the new contract because decided against it, petitioner continued to affirm the lower court's jurisdiction by elevating the
petitioner failed to prove that those were monthly installments that private respondent refused to decision to the appellate court,15 hoping to obtain a favorable decision but the Court of Appeals
accept. What petitioner proved instead was the fact that it was not able to pay the rest of the affirmed the court a quo's ruling. Then and only then did petitioner raise the issue of jurisdiction —
installments because of a strike, fire and storm that affected its operations. Be that as it may, what in its motion for reconsideration of the appellate court's decision. Such a practice, according to Tijam
was clearly proven was that both parties negotiated a new contract after the termination of the first. v. Sibonghanoy,16 cannot be countenanced for reasons of public policy.
Thus, the fact that the parties tried to negotiate a new contract indicated that they considered the Granting, however, that the issue was raised seasonably at the first opportunity, still, petitioner has
first contract as "already cancelled." incorrectly considered as legal bases for its position on the issue of jurisdiction the provisions of P.D.
With respect to petitioner's allegation on a "free right-of-way" constituted on Lot No. 2, the lower Nos. 957 and 1344 and Republic Act No. 6552. P.D. No. 957, the "Subdivision and Condominium
court found that the agreement thereon was oral and not in writing. As such, it was not in accordance Buyers' Protective Decree" which took effect upon its approval on July 12, 1976, vests upon the
with Art. 749 of the Civil Code requiring that, to be valid, a donation must be in a public document. National Housing Authority (NHA) "exclusive jurisdiction to regulate the real estate trade and
Consequently, because of the principle against unjust enrichment, petitioner must pay rentals for the business" in accordance with the provisions of the same decree. 17 P.D. No. 1344, issued on April 2,
occupancy of the property. The lower court disposed of the case as follows: 1978, empowered the National Housing Authority to issue a writ of execution in the enforcement of
IN VIEW OF ALL THE FOREGOING, defendant corporation is hereby directed to return its decisions under P.D. No. 957.
subject Lots Nos. 2, 3, 4, 5, 6, 7 and 8 to plaintiff corporation, and to pay to the latter the These decrees, however, were not yet in existence when private respondent invoked provision No.
following amounts: 9 of the agreements or contracts to sell and cancelled these in October 1971. 18 Article 4 of the Civil
1. reasonable rental of P1.00 per square meter per Code provides that laws shall have no retroactive effect unless the contrary is provided. Thus, it is
month from May 29, 1961, for Lots Nos. 3, 4, 5, 6, 7 necessary that an express provision for its retroactive application must be made in the law. 19 There
and 8, and from July 12, 1984, for Lot No. 2, up to the being no such provision in both P.D. Nos. 957 and 1344, these decrees cannot be applied to a
date they will vacate said lots. The amount of situation that occurred years before their promulgation. Moreover, granting that said decrees indeed
P4,735.12 (Exhibit "R") already paid by defendant provide for a retroactive application, still, these may not be applied in this case.
corporation to plaintiff corporation for the six (6) lots The contracts to sell of 1961 were cancelled in virtue of provision No. 9 thereof to which the parties
under the original contracts shall be deducted from the voluntarily bound themselves. In Manila Bay Club Corp. v. Court of Appeals,20 this Court interpreted
said rental; as requiring mandatory compliance by the parties, a provision in a lease contract that failure or
neglect to perform or comply with any of the covenants, conditions, agreements or restrictions 27
2. attorney's fees in the amount of P10,000.00; and
stipulated shall result in the automatic termination and cancellation of the lease. The Court added:
3. costs of the suit.
. . . . Certainly, there is nothing wrong if the parties to the lease contract agreed on certain
SO ORDERED.
mandatory provisions concerning their respective rights and obligations, such as the
Petitioner elevated the case to the Court of Appeals. However, on October 16, 1992, the Court of procurement of insurance and the rescission clause. For it is well to recall that contracts are
Appeals affirmed in toto the lower court's decision. Petitioner's motion for reconsideration having respected as the law between the contracting parties, and they may establish such
been denied, it instituted the instant petition for review on certiorari raising the following issues for stipulations, clauses, terms and conditions as they may want to include. As long as such
resolution: agreements are not contrary to law, morals, good customs, public policy or public order
(1) whether or not the lower court had jurisdiction over the subject matter they shall have the force of law between them.
of the case in view of the provisions of Republic Act No. 6552 and Consequently, when petitioner failed to abide by its obligation to pay the installments in accordance
Presidential Decree No. 1344; with the contracts to sell, provision No. 9 automatically took effect. That private respondent failed to
(2) whether or not there was a perfected and enforceable contract of sale observe Section 4 of Republic Act No. 6552, the "Realty Installment Buyer Protection Act," is of no
(sic) on October 11, 1983 which modified the earlier contracts to sell moment. That section provides that "(I)f the buyer fails to pay the installments due at the expiration
which had not been validly rescinded; of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of
(3) whether or not there was a valid grant of right of way involving Lot the notice of cancellation or the demand for rescission of the contract by a notarial act. Private
No. 2 in favor of petitioner; and respondent's cancellation of the agreements without a duly notarized demand for rescission did not
mean that it violated said provision of law. Republic Act No. 6552 was approved on August 26, 1972,
(4) whether or not there was a justification for the grant of rentals and long after provision No. 9 of the contracts to sell had become automatically operational. As with P.D.
the award of attorney's fees in favor of private respondent.12 Nos. 957 and 1344, Republic Act No. 6552 does not expressly provide for its retroactive application
The issue of jurisdiction has been precluded by the principle of estoppel. It is settled that lack of and, therefore, it could not have encompassed the cancellation of the contracts to sell in this case.
jurisdiction may be assailed at any stage of the proceedings. However, a party's participation therein At this juncture, it is apropos to stress that the 1961 agreements are contracts to sell and not
estops such party from raising the issue.13 Petitioner undoubtedly has actively participated in the contracts of sale. The distinction between these contracts is graphically depicted in Adelfa Properties,
proceedings from its inception to date. In its answer to the complaint, petitioner did not assail the
lower court's jurisdiction; instead, it prayed for "affirmative relief. 14 Even after the lower court had
Inc. v. Court of the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act
Appeals,21 as follows: and upon full payment of the cash surrender value," and added that "R.A. 6552 even more
. . . . The distinction between the two is important for in a contract of sale, the title passes underscored the indispensability of such notice to the defaulting buyer." However, the same appellate
to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by court continued:
agreement the ownership is reserved in the vendor and is not to pass until the full payment The absence of the aforesaid notice in the case at bar in the forms respectively deemed
of the price. In a contract of sale, the vendor has lost and cannot recover ownership until efficacious before and after the passage of R.A. 6552 does not, however, necessarily
and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is impress merit in the appellant's position. Extrajudicial rescission, after all, has legal effect
retained by the vendor until the full payment of the price, such payment being a positive where the other party does not oppose it (Zulueta vs. Mariano, 111 SCRA 206; Nera vs.
suspensive condition and failure of which is not a breach but an event that prevents the Vacante, 3 SCRA 505; Magdalena Estate vs. Myrick, 71 Phil. 344). Where it is objected to,
obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is a judicial determination of the issue is still necessary. In other words, resolution of reciprocal
considered absolute in nature where there is neither a stipulation in the deed that title to contracts may be made extrajudicially unless successfully impugned in Court. If the debtor
the property sold is reserved in the seller until the full payment of the price, nor one giving impugns the declaration, it shall be subject to judicial determination (Jison vs. Court of
the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay Appeals, 164 SCRA 339, citing Palay Inc. vs. Clave, supra; Univ. of the Philippines vs.
within a fixed period. Angeles, supra). In its July 5, 1984 complaint, the appellee had, in fact, significantly prayed
That the agreements of 1961 are contracts to sell is clear from the following provisions thereof: for the cancellation of the said sales agreement in the alternative (p. 4, orig.
rec.).27 (Emphasis supplied.)
3. Title to said parcel of land shall remain in the name of the OWNER until complete payment
by the PURCHASER of all obligations herein stipulated, at which time the OWNER agrees to Moreover, private respondent's act of cancelling the contracts to sell was not done arbitrarily. The
execute a final deed of sale in favor of the PURCHASER and cause the issuance of a record shows that private respondent dealt with petitioner with admirable patience, probably in view
certificate of title in the name of the latter, free from liens and encumbrances except those of the strike, the fire in 1968 that burned petitioner's factory, and the typhoon in 1970.28 If exercised
provided in the Land Registration Act, those imposed by the authorities, and those contained its contractual authority to cancel the agreements only after petitioner had reneged in its obligation
in Clauses Nos. Five (5) and Six (6) of this agreement. after paying only eight (8) installments. When the contracts matured, it still gave petitioner a grace
period of four (4) months within which to comply with its obligations. It considered the contracts
xxx xxx xxx
cancelled only as of October 1971 or several years after petitioner's last installment payment 29 and
4. The PURCHASER shall be deemed for all legal purposes to take possession of the parcel definitely more than ten years after the agreements were entered into. 28
of land upon payment of the down or first payment; provided, however, that his/her
Because the contracts to sell had long been cancelled when private respondent filed the accion
possession under this section shall be only that of a tenant or lessee and subject to
publiciana de posesion on July 12, 1984, it was the proper Regional Trial Court that had jurisdiction
ejectment proceedings during all the period of this agreement.
over the case. By then, there was no more installment buyer and seller relationship to speak of. It
5. The parcel of land subject of this agreement shall be used by the PURCHASER exclusively had been recuded to a mere case of an owner claiming possession of its property that had long been
for legal purposes, and he shall not be entitled to take or remove soil, stones, or gravel illegally withheld from it by another.
from it or any other lots belonging to the OWNER.
Petitioner alleges that there was a "new perfected and enforceable contract of sale" between the
Hence, being contracts to sell, Article 1592 of the Civil Code which requires rescission either by parties in October 1983 for two reasons. First, it paid private respondent the down payment or
judicial action or notarial act is not applicable.22 "deposit of Contract"30 through the five checks. Second, the receipt signed by private respondent's
Neither may petitioner claim ignorance of the cancellation of the contracts. Aside from his letters of representative satisfies the requirement of a "note or memorandum" under Article 1403 (2) of the
March 30, 1980 and February 16, 1981, private respondent's counsel, Atty. Manuel Villamayor, had Civil Code because it states the object of the contract (six lots of Mar-Ick Subdivision measuring
sent petitioner other formal protests and demands.23 These letters adequately satisfied the notice 1,453 square meters), the price (P250.00 per square meter with a down payment of 10% or
requirement stipulated in provision No. 9 of the contracts to sell. If petitioner had not agreed to the P37,542.72), and the receipt itself opens with a statement referring to the "purchase" of the six lots
automatic and extrajudicial cancellation of the contracts, it could have gone to court to impugn the of Mar-Ick Subdivision.31
same but it did not. Instead, it sought to enter into a new contract to sell, thereby confirming its The contract of October 1983 which private respondent offered in evidence as Exhibit S, is entitled
veracity and validity of the extrajudicial rescission.24 Had not private respondent filed the accion "CONTRACT TO SELL." While the title of a contract is not controlling, its stipulations confirm the
publiciana de posesion, petitioner would have remained silent about the whole situation. It is now nature of that contract. Thus, it provides:
estopped from questioning the validity of the cancellation of the contracts. An unopposed rescission
5. Title to said parcels of land shall remain in the name of the OWNER until complete
of a contract has legal effects.25
payment by the PURCHASER of all obligations herein stipulated, at which time, the OWNER
Petitioner's reliance on the portion of the Court of Appeals' Decision stating that private respondent agrees to execute a final deed of sale in favor of the PURCHASER and cause the issuance
had not made known to petitioner its supposed rescission of the contract,26 is misplaced. Moreover, of certificates of title in the name of the latter, free from all liens and encumbrances except
it quoted only the portion that appears favorable to its case. To be sure, the Court of Appeals quoted those provided in the Land Registration Act, those imposed by the authorities, and those
provision No. 9 which requires that "actual cancellation shall take place thirty days from receipt by contained in the stipulations that follow.
Under the law, there is a binding contract between the parties whose minds have met on a certain The mere sending of a letter by the vendee expressing the intention to pay, without the
matter notwithstanding that they did not affix their signatures to its written form. accompanying payment, is not considered a valid tender of payment. Besides, a mere
In the case at bar, it was private respondent's company lawyer and sole witness, Atty. Manuel tender of payment is not sufficient to compel private respondents to deliver the property
Villamayor, who volunteered that after the cancellation of the 1961 agreements, the parties should and execute the deed of absolute sale. It is consignation which is essential in order to
negotiate and enter into "a new agreement based on the current price" or at P400.00 per square extinguish petitioner's obligation to pay the balance of the purchase price. The rule is
meter. However, there was a hitch in the negotiations because after he had drafted the contract and different in case of an option contract or in legal redemption or in a sale with right to
sent it to petitioner, the latter "deposited a check for downpayment" but its representative refused repurchase, wherein consignation is not necessary because these cases involve an exercise
to sign the prepared contract.32 Private respondent even offered the contract to sell as its Exhibit of a right or privilege (to buy, redeem or repurchase) rather than the discharge of an
S.33 In the absence of proof to the contrary, this draft contract may be deemed to embody the obligation, hence tender of payment would be sufficient to preserve the right or privilege.
agreement of the parties. Moreover, when Tomas Siatianun, petitioner's president, testified, private This is because the provisions on consignation are not applicable when there is no obligation
respondent cross-examined him as regards the October 1983 contract.34 Private respondent did not to pay. A contract to sell, as in the case before us, involves the performance of an obligation,
and has not denied the existence of that contract. not merely the exercise of a privilege or a right. Consequently, performance or payment
may be effected not by tender of payment alone but by both tender and
Under these facts, therefore, the parties may ideally be considered as having perfected the contract
consignation.41 (Emphasis supplied.)
of October 1983. Again in Adelfa Properties, Inc. v. Court of Appeals, the Court said that
As earlier noted, petitioner did not lift a finger towards the performance of the contract other than
. . . a contract, like a contract to sell, involves a meeting of the minds between two persons
the tender of down payment. There is no record that it even bothered to tender payment of the
whereby one binds himself, with respect to the other, to give something or to render some
installments or to amend the contract to reflect the true intention of the parties as regards the
service. Contracts, in general, are perfected by mere consent, which is manifested by the
number of lots to be sold. Indeed, by petitioner's inaction, private respondent may not be judicially
meeting of the offer and the acceptance upon the thing and the cause which are to
enjoined to validate a contract that the former appeared to have taken for granted. As in the earlier
constitute the contract. The offer must be certain and the acceptance absolute.35
agreements, petitioner ignored opportunities to resuscitate a contract to sell that was rendered
Moreover, private respondent's offer to sell and petitioner's acceptance thereof are manifest in the moribund and inoperative by its inaction.
documentary evidence presented by the parties. Thus, private respondent presented the five (5)
In view of the foregoing, there is no need to discuss the issue of whether or not there was a valid
checks36 that, through Atty. Villamayor, it admitted as the down payment under the October 1983
grant of right of way in favor of petitioners. Suffice it to say that the documentary evidence offered
contract. Private respondent's intentional non-encashment of the check cannot serve to belie the fact
by petitioner on the matter manifests that that right of way on an unidentified property was granted 29
of its tender as down payment. For its part, petitioner presented Exhibit 10, a receipt dated February
in April 1961 by private respondent's board of directors to W. Ick & Sons, Inc. and Julian
28, 1984, showing that private respondent's authorized representative received the total amount of
Martinez.42 On May 12, 1961, Fritz Ick, the president of W. Ick & Sons, Inc., in turn indorsed the
P37,642.72 represented by said five checks as "deposit of Contract ( sic)." As this Court also held in
unidentified property to petitioner.43
the Adelfa Properties case, acceptance may be evidenced by some acts or conduct communicated to
the offeror, either in a formal or an informal manner, that clearly manifest the intention or What needs stressing is that the installments paid by the petitioner on the land should be deemed
determination to accept the offer to buy or rentals in accordance with provision No. 9, as well as by law. Article 1486 of the Civil Code provides
sell.37 that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be unconscionable under the circumstances. 44 The down
Justice and equity, however, will not be served by a positive ruling on the perfection and performance
payment and the eight (8) installments paid by petitioner on the six lots under the 1961 agreements
of the contract to sell. There are facts on record proving that, after all, the parties had not arrived
amounted to P5,672.00. The lots, including Lot No. 2, adjoins petitioner's Vetsin and oil factories
at a definite agreement. By Atty. Villamayor's admission, the checks were not encashed because
constructed on a 20,000-square-meter land that petitioner likewise bought from private respondent.
Tomas Siatianun did not sign the draft contract that he had prepared.38 On his part, Tomas Siatianun
Obviously, petitioner made use of the lots not only during the construction of the factories but also
explained that he did not sign the contract because it covered seven (7) lots while their agreement
during its operations as an oil factory. Petitioner enclosed the area with a fence and made
was only for six (6) lots. According to him, private respondent had conceded that Lot No. 2 was
constructions thereon. It is, therefore, not unconscionable to allow respondent rentals on the lots as
meant for petitioner's right of way39 and, therefore, it could not have been part of the properties it
correctly decreed by the lower court.
wanted to buy. It is on record, moreover, that the only agreement that the parties arrived at in a
conference at the Silahis Hotel was the price indicated in the draft contract.40 As to attorney's fees, Article 2208 of the Civil Code allows the award of such fees when its claimant
is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. In
The number of lots to be sold is a material component of the contract to sell. Without an agreement
view of petitioner's rejection of private respondent's demands for rentals45 and its unjustified refusal
on the matter, the parties may not in any way be considered as having arrived at a contract under
to settle private respondent's claims,46 the award of attorney's fees of P10,000.00 is more than just
the law. The parties' failure to agree on a fundamental provision of the contract was aggravated by
and reasonable.47
petitioner's failure to deposit the installments agreed upon. Neither did it attempt to make a
consignation of the installments. This Court's disquisition on the matter in the Adelfa Properties case WHEREFORE, the instant petition for review on certiorari is hereby denied and the questioned
is relevant. Thus: Decision of the Court of Appeals is AFFIRMED. This Decision is immediately executory. Costs against
petitioner.
FIRST DIVISION lost and/or misplaced."8 On the same day, after receipt of Chua's verbal order, PBCom Assistant
G.R. No. 119255 April 9, 2003 Vice–President Julie C. Pe notified in writing9 the PBCom Operations Group of Chua's stop payment
order.
TOMAS K. CHUA, petitioner,
vs. In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels to execute
COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents. the necessary documents and arrange the payments.10 Valdes-Choy as vendor and Chua as
vendee signed two Deeds of Absolute Sale ("Deeds of Sale"). The first Deed of Sale covered the
CARPIO, J.:
house and lot for the purchase price of P8,000,000.00.11 The second Deed of Sale covered the
The Case furnishings, fixtures and movable properties contained in the house for the purchase price of
This is a petition for review on certiorari seeking to reverse the decision1 of the Court of Appeals in P2,800,000.00.12 The parties also computed the capital gains tax to amount to P485,000.00.
an action for specific performance2 filed in the Regional Trial Court3 by petitioner Tomas K. Chua On 14 July 1989, the parties met again at the office of Valdes-Choy's counsel. Chua handed to Valdes-
("Chua") against respondent Encarnacion Valdes-Choy ("Valdes-Choy"). Chua sought to compel Choy the PBCom manager's check for P485,000.00 so Valdes-Choy could pay the capital gains tax
Valdes-Choy to consummate the sale of her paraphernal house and lot in Makati City. The Court of as she did not have sufficient funds to pay the tax. Valdes-Choy issued a receipt showing that Chua
Appeals reversed the decision4 rendered by the trial court in favor of Chua. had a remaining balance of P10,215,000.00 after deducting the advances made by Chua. This receipt
The Facts reads:
Valdes-Choy advertised for sale her paraphernal house and lot ("Property") with an area of 718 July 14, 1989
square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village, Makati
City. The Property is covered by Transfer Certificate of Title No. 162955 ("TCT") issued by the Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of FOUR
Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to the advertisement. HUNDRED EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as Partial Payment for the
After several meetings, Chua and Valdes-Choy agreed on a purchase price of P10,800,000.00 payable sale of the property located at 40 Tampingco Cor. Hidalgo St., San Lorenzo Village, Makati,
in cash. Metro Manila (Area 718 sq. meters), covered by TCT No. 162955 of the Registry of Deeds
On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt ("Receipt") of Makati, Metro Manila.
evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer, reads: The total purchase price of the above-mentioned property is TEN MILLION EIGHT
HUNDRED THOUSAND PESOS only, broken down as follows: 30
30 June 1989
SELLING PRICE P10,800,000.00
RECEIPT
RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE EARNEST MONEY P100,000.00
HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the sale of the
property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila PARTIAL PAYMENT 485,000.00
(Area : 718 sq. meters).
The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable 585,000.00
on or before 155July 1989. Capital Gains Tax for the account of the seller. Failure to pay
balance on or before 15 July 1989 forfeits the earnest money. This provided that all papers BALANCE DUE TO
are in proper order.6 ENCARNACION VALDEZ-CHOY P10,215,000.00

CONFORME: PLUS P80,000.00 for documentary stamps paid in


advance by seller 80,000.00
ENCARNACION VALDES
Seller P10,295,000.00

TOMAS K. CHUA x x x.13


Buyer On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the P485,000.00
manager's check to her account with Traders Royal Bank. She then purchased a Traders Royal Bank
x x x.7 manager's check for P480,000.00 payable to the Commissioner of Internal Revenue for the capital
In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce ("PBCom") a gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choy's counsel and handed the
manager's check for P480,000.00. Strangely, after securing the manager's check, Chua immediately Traders Royal Bank check to the counsel who undertook to pay the capital gains tax. It was then
gave PBCom a verbal stop payment order claiming that this manager's check for P480,000.00 "was also that Chua showed to Valdes-Choy a PBCom manager's check for P10,215,000.00 representing
the balance of the purchase price. Chua, however, did not give this PBCom manager's check to c. to pay the required registration fees and stamps (if not yet advanced by the
Valdes-Choy because the TCT was still registered in the name of Valdes-Choy. Chua required that defendant) and if needed update the real estate taxes all to be taken from the
the Property be registered first in his name before he would turn over the check to Valdes-Choy. This funds deposited with her; and
angered Valdes-Choy who tore up the Deeds of Sale, claiming that what Chua required was not part d. surrender to the plaintiff the new Torrens title over the property;
of their agreement.14
4. Should the defendant fail or refuse to surrender the two deeds of sale over the property
On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to PBCom an and the fixtures that were prepared by Atty. Mark Bocobo and executed by the parties, the
affidavit of loss15 of the PBCom Manager's Check for P480,000.00. PBCom Assistant Vice-President Branch Clerk of Court of this Court is hereby authorized and empowered to prepare, sign
Pe, however, testified that the manager's check was nevertheless honored because Chua and execute the said deeds of sale for and in behalf of the defendant;
subsequently verbally advised the bank that he was lifting the stop-payment order due to his "special
5. Ordering the defendant to pay to the plaintiff;
arrangement" with the bank.16
a. the sum of P100,000.00 representing moral and compensatory damages for the
On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-Choy
plaintiff; and
suggested to her counsel that to break the impasse Chua should deposit in escrow the
P10,215,000.00 balance.17 Upon such deposit, Valdes-Choy was willing to cause the issuance of a b. the sum of P50,000.00 as reimbursement for plaintiff's attorney's fees and cost
new TCT in the name of Chua even without receiving the balance of the purchase price. Valdes-Choy of litigation.
believed this was the only way she could protect herself if the certificate of title is transferred in the 6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be taken
name of the buyer before she is fully paid. Valdes-Choy's counsel promised to relay her suggestion from the funds said plaintiff has deposited with the Court, the amounts covered at
to Chua and his counsel, but nothing came out of it. paragraph 5 above;
On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which the trial 7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom
court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his complaint for specific the following amounts:
performance with damages. After trial in due course, the trial court rendered judgment in favor of a. the capital gains tax paid to the BIR;
Chua, the dispositive portion of which reads:
b. the expenses incurred in the registration of the sale, updating of real estate
Applying the provisions of Article 1191 of the new Civil Code, since this is an action for taxes, and transfer of title; and
specific performance where the plaintiff, as vendee, wants to pursue the sale, and in order 31
that the fears of the defendant may be allayed and still have the sale materialize, judgment c. the amounts paid under this judgment to the plaintiff.
is hereby rendered: 8. Ordering the defendant to surrender to the plaintiff or his representatives the premises
I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from finality with the furnishings intact within seventy-two (72) hours from receipt of the proceeds of
of this decision: the sale;
a. the owner's duplicate copy of TCT No. 162955 registered in her name; 9. No interest is imposed on the payment to be made by the plaintiff because he had always
been ready to pay the balance and the premises had been used or occupied by the
b. the covering tax declaration and the latest tax receipt evidencing payment of defendant for the duration of this case.
real estate taxes;
II. In the event that specific performance cannot be done for reasons or causes not
c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly attributable to the plaintiff, judgment is hereby rendered ordering the defendant:
executed by defendant in favor of the plaintiff, whether notarized or not; and
1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at
2. Within five (5) days from compliance by the defendant of the above, ordering the plaintiff the legal rate from June 30, 1989 until fully paid;
to deliver to the Branch Clerk of Court of this Court the sum of P10,295,000.00 representing
the balance of the consideration (with the sum of P80,000.00 for stamps already included); 2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from July
14, 1989 until fully paid;
3. Ordering the Branch Clerk of this Court or her duly authorized representative:
3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the
a. to make representations with the BIR for the payment of capital gains tax for additional sum of P300,000.00 in the concept of exemplary damages; and
the sale of the house and lot (not to include the fixtures) and to pay the same
from the funds deposited with her; 4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorney's fees and
cost of litigation.
b. to present the deed of sale executed in favor of the plaintiff, together with the
owner's duplicate copy of TCT No. 162955, real estate tax receipt and proof of SO ORDERED.18
payment of capital gains tax, to the Makati Register of Deeds; Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. The
Court of Appeals handed down a new judgment, disposing as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another Contrary to the findings of the trial court, the Court of Appeals found that all the papers were in
one is rendered: order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a position
(1) Dismissing Civil Case No. 89-5772; to deliver the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and
the latest realty tax receipt. The Property was also free from all liens and encumbrances.
(2) Declaring the amount of P100,000.00, representing earnest money as forfeited
in favor of defendant-appellant; The Court of Appeals declared that the trial court erred in considering Chua's showing to Valdes-
Choy of the PBCom manager's check for P10,215,000.00 as compliance with Chua's obligation to pay
(3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to
on or before 15 July 1989. The Court of Appeals pointed out that Chua did not want to give up the
plaintiff-appellee without interest;
check unless "the property was already in his name."20 Although Chua demonstrated his capacity to
(4) Dismissing defendant-appellant's compulsory counter-claim; and pay, this could not be equated with actual payment which he refused to do.
(5) Ordering the plaintiff-appellee to pay the costs.19 The Court of Appeals did not consider the non-payment of the capital gains tax as failure by Valdes-
Hence, the instant petition. Choy to put the papers "in proper order." The Court of Appeals explained that the payment of the
The Trial Court's Ruling capital gains tax has no bearing on the validity of the Deeds of Sale. It is only after the deeds are
signed and notarized can the final computation and payment of the capital gains tax be made.
The trial court found that the transaction reached an impasse when Valdes-Choy wanted to be first
paid the full consideration before a new TCT covering the Property is issued in the name of Chua. The Issues
On the other hand, Chua did not want to pay the consideration in full unless a new TCT is first issued In his Memorandum, Chua raises the following issues:
in his name. The trial court faulted Valdes-Choy for this impasse. 1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE PROPERTY;
The trial court held that the parties entered into a contract to sell on 30 June 1989, as evidenced by 2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY WITHOUT
the Receipt for the P100,000.00 earnest money. The trial court pointed out that the contract to sell OBSERVING THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL CODE;
was subject to the following conditions: (1) the balance of P10,700,000.00 was payable not later
3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE PURCHASE
than 15 July 1989; (2) Valdes-Choy may stay in the Property until 13 August 1989; and (3) all papers
PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY THE CIRCUMSTANCES
must be "in proper order" before full payment is made.
OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE AUTOMATIC RESCISSION OF
The trial court held that Chua complied with the terms of the contract to sell. Chua showed that he THE CONTRACT OF SALE;
was prepared to pay Valdes-Choy the consideration in full on 13 July 1989, two days before the 32
4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS TO
deadline of 15 July 1989. Chua even added P80,000.00 for the documentary stamp tax. He purchased
DECLARE THE "EARNEST MONEY" IN THE AMOUNT OF P100,000.00 AS FORFEITED IN
from PBCom two manager's checks both payable to Valdes-Choy. The first check for P485,000.00
FAVOR OF VALDES-CHOY;
was to pay the capital gains tax. The second check for P10,215,000.00 was to pay the balance of
the purchase price. The trial court was convinced that Chua demonstrated his capacity and readiness 5. WHETHER THE TRIAL COURT'S JUDGMENT IS IN ACCORD WITH LAW, REASON AND
to pay the balance on 13 July 1989 with the production of the PBCom manager's check for EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED.21
P10,215,000.00. The issues for our resolution are: (a) whether the transaction between Chua and Valdes-Choy is a
On the other hand, the trial court found that Valdes-Choy did not perform her correlative obligation perfected contract of sale or a mere contract to sell, and (b) whether Chua can compel Valdes-Choy
under the contract to sell to put all the papers in order. The trial court noted that as of 14 July 1989, to cause the issuance of a new TCT in Chua's name even before payment of the full purchase price.
the capital gains tax had not been paid because Valdes-Choy's counsel who was suppose to pay the The Court's Ruling
tax did not do so. The trial court declared that Valdes-Choy was in a position to deliver only the The petition is bereft of merit.
owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest
There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in her
realty tax receipt. The trial court concluded that these documents were all useless without the Bureau
name under TCT No.162955, free from all liens and encumbrances. She was ready, able and willing
of Internal Revenue receipt evidencing full payment of the capital gains tax which is a pre-requisite
to deliver to Chua the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax
to the issuance of a new certificate of title in Chua's name.
declarations, and the latest realty tax receipt. There is also no dispute that on 13 July 1989, Valdes-
The trial court held that Chua's non-payment of the balance of P10,215,000.00 on the agreed date Choy received PBCom Check No. 206011 for P100,000.00 as earnest money from Chua. Likewise,
was due to Valdes-Choy's fault. there is no controversy that the Receipt for the P100,000.00 earnest money embodied the terms of
The Court of Appeals' Ruling the binding contract between Valdes-Choy and Chua.
In reversing the trial court, the Court of Appeals ruled that Chua's stance to pay the full consideration Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed on
only after the Property is registered in his name was not the agreement of the parties. The Court of the following terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989; (2) the
Appeals noted that there is a whale of difference between the phrases "all papers are in proper capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay the balance of
order" as written on the Receipt, and "transfer of title" as demanded by Chua. P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit the earnest money,
provided that "all papers are in proper order." On 13 July 1989, Chua gave Valdes-Choy the PBCom the purchase price. This is also similar to giving the seller the right to rescind unilaterally the contract
manager's check for P485,000.00 to pay the capital gains tax. the moment the buyer fails to pay within a fixed period.26
Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually paid to Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather than in a
Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the PBCom deed of sale, ownership not having passed between them. The signing of the Deeds of Sale came
manager's check for P10,215,000.00, with Valdes-Choy as payee. However, Chua refused to give later when Valdes-Choy was under the impression that Chua was about to pay the balance of the
this check to Valdes-Choy until a new TCT covering the Property is registered in Chua's name. Or, purchase price. The absence of a formal deed of conveyance is a strong indication that the parties
as the trial court put it, until there is proof of payment of the capital gains tax which is a pre-requisite did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase
to the issuance of a new certificate of title. price.27
First and Second Issues: Contract of Sale or Contract to Sell? Third, Valdes-Choy retained possession of the certificate of title and all other documents relative to
Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the Receipt, the sale. When Chua refused to pay Valdes-Choy the balance of the purchase price, Valdes-Choy
as a contract to sell and not a contract of sale. This has been Chua's persistent contention in his also refused to turn-over to Chua these documents.28 These are additional proof that the agreement
pleadings before the trial and appellate courts. did not transfer to Chua, either by actual or constructive delivery, ownership of the Property.29
Chua now pleads for the first time that there is a perfected contract of sale rather than a contract to It is true that Article 1482 of the Civil Code provides that "[W]henever earnest money is given in a
sell. He contends that there was no reservation in the contract of sale that Valdes-Choy shall retain contract of sale, it shall be considered as part of the price and proof of the perfection of the contract."
title to the Property until after the sale. There was no agreement for an automatic rescission of the However, this article speaks of earnest money given in a contract of sale. In this case, the earnest
contract in case of Chua's default. He argues for the first time that his payment of earnest money money was given in a contract to sell. The Receipt evidencing the contract to sell stipulates that the
and its acceptance by Valdes-Choy precludes the latter from rejecting the binding effect of the earnest money is a forfeitable deposit, to be forfeited if the sale is not consummated should Chua
contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract of sale fail to pay the balance of the purchase price. The earnest money forms part of the consideration only
without following Article 159222 of the Civil Code which requires demand, either judicially or by if the sale is consummated upon full payment of the purchase price. If there is a contract of sale,
notarial act, before rescission may take place. Valdes-Choy should have the right to compel Chua to pay the balance of the purchase price. Chua,
however, has the right to walk away from the transaction, with no obligation to pay the balance,
Chua's new theory is not well taken in light of well-settled jurisprudence. An issue not raised in the
although he will forfeit the earnest money. Clearly, there is no contract of sale. The earnest money
court below cannot be raised for the first time on appeal, as this is offensive to the basic rules of fair
was given in a contract to sell, and thus Article 1482, which speaks of a contract of sale, is not
play, justice and due process.23 In addition, when a party deliberately adopts a certain theory, and 33
applicable.
the case is tried and decided on that theory in the court below, the party will not be permitted to
change his theory on appeal. To permit him to change his theory will be unfair to the adverse party. 24 Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment of
the purchase price partakes of a suspensive condition. The non-fulfillment of the condition prevents
Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement between
the obligation to sell from arising and ownership is retained by the seller without further remedies
Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale.
by the buyer.30 Article 1592 of the Civil Code permits the buyer to pay, even after the expiration of
The distinction between a contract of sale and contract to sell is well-settled:
the period, as long as no demand for rescission of the contract has been made upon him either
In a contract of sale, the title to the property passes to the vendee upon the delivery of the judicially or by notarial act. However, Article 1592 does not apply to a contract to sell where the
thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is seller reserves the ownership until full payment of the price. 31
not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a
Third and Fourth Issues: Withholding of Payment of the
contract of sale, the vendor loses ownership over the property and cannot recover it until
Balance of the Purchase Price and Forfeiture of the Earnest Money
and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is
retained by the vendor until full payment of the price. In the latter contract, payment of the Chua insists that he was ready to pay the balance of the purchase price but withheld payment
price is a positive suspensive condition, failure of which is not a breach but an event that because Valdes-Choy did not fulfill her contractual obligation to put all the papers in "proper order."
prevents the obligation of the vendor to convey title from becoming effective.25 Specifically, Chua claims that Valdes-Choy failed to show that the capital gains tax had been paid
after he had advanced the money for its payment. For the same reason, he contends that Valdes-
A perusal of the Receipt shows that the true agreement between the parties was a contract to sell.
Choy may not forfeit the earnest money even if he did not pay on time.
Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full
payment of the purchase price. There is a variance of interpretation on the phrase "all papers are in proper order" as written in the
Receipt. There is no dispute though, that as long as the papers are "in proper order," Valdes-Choy
First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to pay
has the right to forfeit the earnest money if Chua fails to pay the balance before the deadline.
the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy can sell the
Property to other interested parties. There is in effect a right reserved in favor of Valdes-Choy not to The trial court interpreted the phrase to include payment of the capital gains tax, with the Bureau of
push through with the sale upon Chua's failure to remit the balance of the purchase price before the Internal Revenue receipt as proof of payment. The Court of Appeals held otherwise. We quote
deadline. This is in the nature of a stipulation reserving ownership in the seller until full payment of verbatim the ruling of the Court of Appeals on this matter:
The trial court made much fuss in connection with the payment of the capital gains tax, of the seller. As between the seller and buyer, ownership is transferred not by the issuance of a new
which Section 33 of the National Internal Revenue Code of 1977, is the governing provision certificate of title in the name of the buyer but by the execution of the instrument of sale in a public
insofar as its computation is concerned. The trial court failed to consider Section 34-(a) of document.
the said Code, the last sentence of which provides, that "[t]he amount realized from the In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted civil law
sale or other disposition of property shall be the sum of money received plus the fair market commentator Arturo M. Tolentino explains it, -
value of the property (other than money) received;" and that the computation of the capital
Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of
gains tax can only be finally assessed by the Commission on Internal Revenue upon the
acquiring dominion and determines the transmission of ownership, the birth of the real
presentation of the Deeds of Absolute Sale themselves, without which any premature
right. The delivery, therefore, made in any of the forms provided in articles 1497 to 1505
computation of the capital gains tax becomes of no moment. At any rate, the computation
signifies that the transmission of ownership from vendor to vendee has taken place . The
and payment of the capital gains tax has no bearing insofar as the validity and effectiveness
delivery of the thing constitutes an indispensable requisite for the purpose of acquiring
of the deeds of sale in question are concerned, because it is only after the contracts of sale
ownership. Our law does not admit the doctrine of transfer of property by mere consent;
are finally executed in due form and have been duly notarized that the final computation of
the ownership, the property right, is derived only from delivery of the thing. x x
the capital gains tax can follow as a matter of course. Indeed, exhibit D, the PBC Check No.
x.33 (Emphasis supplied)
325851, dated July 13, 1989, in the amount of P485,000.00, which is considered as part of
the consideration of the sale, was deposited in the name of appellant, from which she in In a contract of sale of real property, delivery is effected when the instrument of sale is executed in
turn, purchased the corresponding check in the amount representing the sum to be paid a public document. When the deed of absolute sale is signed by the parties and notarized, then
for capital gains tax and drawn in the name of the Commissioner of Internal Revenue, which delivery of the real property is deemed made by the seller to the buyer. Article 1498 of the Civil Code
then allayed any fear or doubt that that amount would not be paid to the Government after provides that –
all.32 Art. 1498. When the sale is made through a public instrument, the execution thereof shall
We see no reason to disturb the ruling of the Court of Appeals. be equivalent to the delivery of the thing which is the object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred.
In a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening
of the suspensive condition. In this case, the suspensive condition is the full payment of the purchase x x x.
price by Chua. Such full payment gives rise to Chua's right to demand the execution of the contract Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign the deed
of sale. of absolute sale before a notary public, the seller is in a position to transfer ownership of the real 34
It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the property to the buyer. At this point, the seller complies with his undertaking to sell the real property
ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a contract of sale as in accordance with the contract to sell, and to assume all the obligations of a vendor under a contract
follows: of sale pursuant to the relevant articles of the Civil Code. In a contract to sell, the seller is not
obligated to transfer ownership to the buyer. Neither is the seller obligated to cause the issuance of
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer
a new certificate of title in the name of the buyer. However, the seller must put all his papers in
the ownership of and to deliver a determinate thing, and the other to pay therefor a price
proper order to the point that he is in a position to transfer ownership of the real property to the
certain in money or its equivalent.
buyer upon the signing of the contract of sale.
x x x. (Emphasis supplied)
In the instant case, Valdes-Choy was in a position to comply with all her obligations as a seller under
Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to the the contract to sell. First, she already signed the Deeds of Sale in the office of her counsel in the
buyer, even if there is a contract to sell between them. It is also upon the existence of the contract presence of the buyer. Second, she was prepared to turn-over the owner's duplicate of the TCT to
of sale that the buyer is obligated to pay the purchase price to the seller. Since the transfer of the buyer, along with the tax declarations and latest realty tax receipt. Clearly, at this point Valdes-
ownership is in exchange for the purchase price, these obligations must be simultaneously fulfilled Choy was ready, able and willing to transfer ownership of the Property to the buyer as required by
at the time of the execution of the contract of sale, in the absence of a contrary stipulation. the contract to sell, and by Articles 1458 and 1495 of the Civil Code to consummate the contract of
In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code, as sale.
follows: Chua, however, refused to give to Valdes-Choy the PBCom manager's check for the balance of the
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant purchase price. Chua imposed the condition that a new TCT should first be issued in his name, a
the thing which is the object of the sale. (Emphasis supplied) condition that is found neither in the law nor in the contract to sell as evidenced by the Receipt.
The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of real Thus, at this point Chua was not ready, able and willing to pay the full purchase price which is his
property, the seller is not obligated to transfer in the name of the buyer a new certificate of title, but obligation under the contract to sell. Chua was also not in a position to assume the principal obligation
rather to transfer ownership of the real property. There is a difference between transfer of the of a vendee in a contract of sale, which is also to pay the full purchase price at the agreed time.
certificate of title in the name of the buyer, and transfer of ownership to the buyer. The buyer may Article 1582 of the Civil Code provides that –
become the owner of the real property even if the certificate of title is still registered in the name of
Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at of Deeds, or the issuance of a new certificate of title, does not confer ownership on the buyer. Such
the time and place stipulated in the contract. registration or issuance of a new certificate of title is not one of the modes of acquiring ownership. 40
x x x. (Emphasis supplied) In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that customarily
In this case, the contract to sell stipulated that Chua should pay the balance of the purchase price would complete the sale, and to pay as well the capital gains tax. On the other hand, Chua's condition
"on or before 15 July 1989." The signed Deeds of Sale also stipulated that the buyer shall pay the that a new TCT be first issued in his name before he pays the balance of P10,215,000.00,
balance of the purchase price upon signing of the deeds. Thus, the Deeds of Sale, both signed by representing 94.58% of the purchase price, is not customary in a sale of real estate. Such a condition,
Chua, state as follows: not specified in the contract to sell as evidenced by the Receipt, cannot be considered part of the
"omissions of stipulations which are ordinarily established" by usage or custom.41 What is increasingly
Deed of Absolute Sale covering the lot:
becoming customary is to deposit in escrow the balance of the purchase price pending the issuance
xxx of a new certificate of title in the name of the buyer. Valdes-Choy suggested this solution but
For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine unfortunately, it drew no response from Chua.
Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE, Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him the
the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest
assigns, the said parcel of land, together with the improvements existing thereon, free from realty tax receipt. There was no hindrance to paying the capital gains tax as Chua himself had
all liens and encumbrances.34 (Emphasis supplied) advanced the money to pay the same and Valdes-Choy had procured a manager's check payable to
Deed of Absolute Sale covering the furnishings: the Bureau of Internal Revenue covering the amount. It was only a matter of time before the capital
xxx gains tax would be paid. Chua acted precipitately in filing the action for specific performance a mere
two days after the deadline of 15 July 1989 when there was an impasse. While this case was
For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND PESOS dismissed on 22 November 1989, he did not waste any time in re-filing the same on 29 November
(P2,800,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the 1989.
VENDOR from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his
heirs, successors and assigns, the said furnitures, fixtures and other movable properties Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a
thereon, free from all liens and encumbrances.35 (Emphasis supplied) suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the Property.
Article 1181 of the Civil Code provides that -
However, on the agreed date, Chua refused to pay the balance of the purchase price as required by 35
the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil Code. Chua was therefore ART. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment
in default and has only himself to blame for the rescission by Valdes-Choy of the contract to sell. or loss of those already acquired shall depend upon the happening of the event which
constitutes the condition.
Even if measured under existing usage or custom, Valdes-Choy had all her papers "in proper order."
Article 1376 of the Civil Code provides that: Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him because
the suspensive condition - the full payment of the purchase price - did not happen. There is no
Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of correlative obligation on the part of Valdes-Choy to transfer ownership of the Property to Chua. There
the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily is also no obligation on the part of Valdes-Choy to cause the issuance of a new TCT in the name of
established. Chua since unless expressly stipulated, this is not one of the obligations of a vendor.
Customarily, in the absence of a contrary agreement, the submission by an individual seller to the WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23 February 1995
buyer of the following papers would complete a sale of real estate: (1) owner's duplicate copy of the is AFFIRMED in toto.
Torrens title;36 (2) signed deed of absolute sale; (3) tax declaration; and (3) latest realty tax receipt.
The buyer can retain the amount for the capital gains tax and pay it upon authority of the seller, or SO ORDERED.
the seller can pay the tax, depending on the agreement of the parties.
The buyer has more interest in having the capital gains tax paid immediately since this is a pre-
requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the government
is concerned, the capital gains tax remains a liability of the seller since it is a tax on the seller's gain
from the sale of the real estate. Payment of the capital gains tax, however, is not a pre-requisite to
the transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing and
notarization of the deed of absolute sale.
The recording of the sale with the proper Registry of Deeds 37 and the transfer of the certificate of
title in the name of the buyer are necessary only to bind third parties to the transfer of
ownership.38 As between the seller and the buyer, the transfer of ownership takes effect upon the
execution of a public instrument conveying the real estate.39Registration of the sale with the Registry
Republic of the Philippines to be shown the papers concerning the sale but was referred by the Mayor to the municipal treasurer
SUPREME COURT who refused to show the same (TSN, July 1, 1964, pp. 32-33).
Manila On January 11, 1964, Respondents filed a complaint in the Court of First Instance of Negros
SECOND DIVISION Occidental, Branch 1, for recovery of possession of the parcel of land occupied by the municipal
G.R. No. L-31189 March 31, 1987 cemetery (Record on Appeal, p. 1). In its answer, petitioner Municipality, by way of special defense,
alleged ownership of the lot, subject of the complaint, having bought it from Simeona Jingco Vda.
MUNICIPALITY OF VICTORIAS, petitioner,
de Ditching sometime in 1934 (Record on Appeal, p. 7). The lower court decided in favor of the
vs.
Municipality. On appeal Respondent appellate Court set aside the decision of the lower court (Record
THE COURT OF APPEALS, NORMA LEUENBERGER and FRANCISCO SOLIVA, respondents.
on AppeaL p. 9); hence, this petition for review on certiorari.
This petition was filed with the Court on November 6, 1969 (Rollo, p. 2), the Record on Appeal on
PARAS, J.: December 19, 1969 (Rollo, p. 80). On January 5, 1970, the Court gave due course to the petition
This is a Petition for Review on certiorari of the decision * of respondent Court of Appeals (Rollo, p. 84).
promulgated on September 29, 1969 in CA-G.R. No. 35036-R (Rollo, p. 11) setting aside the The Brief for the Petitioner was filed on April 1, 1970 (Rollo, p. 88), the Brief for Respondents was
decision ** of the Court of First Intance of Negros Occidental, Branch I, dated September 24, 1964 filed on May 18, 1970 (Rollo, p. 92).
which dismissed the complaint for recovery of possession in Civil Case No. 181-S and declared the
On July 8, 1970, the Court resolved to consider the case submitted for decision without Petitioner's
cemetery site on Lot No. 76 in Victorias as property of the municipality of Victorias (Record on Appeal,
Reply Brief, Petitioner having failed to file the brief within the period which expired on June 10, 1970
p. 9).
(Rollo. p. 99).
The dispositive portion of the questioned decision reads as follows:
On motion of counsel for the Respondents (Rollo, p. 104), the Court resolved on June 30, 1972 to
IN VIEW OF THE FOREGOING, the judgment of the lower court is hereby set aside allow respondent Francisco Soliva to continue the appeal in behalf of the estate of respondent Norma
and another is hereby rendered: Leuenberger who died on January 25, 1972, Respondent Francisco Soliva having been appointed
(1) Ordering the defendant municipality and/or thru its appropriate officials to special administrator in Special Proceedings No. 84-V of the Court of First Instance of Negros
return and deliver the possession of the portion of Lot 76 used as cemetery or Occidental (Rollo, p. 110).
burial site of the plaintiff-appellant. In their brief, petitioner raised the following errors of respondent Court of Appeals: (Brief for the 36
(2) Ordering defendant municipality to pay the plaintiff-appellant the sum of Petitioner, p. 1-3);
P400.00 a year from 1963 until the possession of said land is actually delivered. I.
Lot No. 76 containing an area of 208,157 sq. meters forms a part of Cadastral Lot No. 140 (Rollo, p. The Honorable Court of Appeals erred in holding that respondents Norma
11), a 27.2460 ha. sugar land located in Bo. Madaniog, Victorias, Negros Occidental, in the name of Leuenberger and Francisco Soliva are the lawful owners of the land in litigation as
the deceased Gonzalo Ditching under Tax Declaration No. 3429 of Negros Occidental for the year they are estopped from questioning the possession and ownership of herein
1941 (Exh. "3," Folder of Exhibits, p. 22). He was survived by his widow Simeona Jingeo Vda. de petitioner which dates back to more than 30 years.
Ditching and a daughter, Isabel, who died in 1928 (TSN, July 1, 1964, p. 7) leaving one off-spring,
II.
respondent Norma Leuenberger, who was then only six months old (TSN, July 1, 1964, p. 34).
The Honorable Court of Appeals also erred in ordering the petition petitioner to
Respondent Norma Leuenberger, married to Francisco Soliva, inherited the whole of Lot No. 140
deliver the possession of the land in question to the respondents Nomia
from her grandmother, Simeona J. Vda. de Ditching (not from her predeceased mother Isabel
Leuenberger and Francisco Soliva, by holding that non-annotation on the Torrens
Ditching). In 1952, she donated a portion of Lot No. 140, about 3 ha., to the municipality for the
Certificate of Title could not affect the said land when the possession by the
ground of a certain high school and had 4 ha. converted into a subdivision. (TSN, July 1, 1964, p.
petitioner of the said land for over 30 years and using it as a public cemetery for
24).
that length of time are sufficient proof of purchase and transfer of title and non-
In 1963, she had the remaining 21 ha. or 208.157 sq. m. relocated by a surveyor upon request of annotation of the Certificate of Title did not render the sale ineffectual
lessee Ramon Jover who complained of being prohibited by municipal officials from cultivating the
III.
land. It was then that she discovered that the parcel of land, more or less 4 ha. or 33,747 sq.m.
used by Petitioner Municipality of Victorias, as a cemetery from 1934, is within her property which is The Honorable Court of Appeals further erred in ordering the petitioner
now Identified as Lot 76 and covered by TCT No. 34546 (TSN, July 1, 1964, pp. 7-9; Exh. "4," Folder Municipality of Victories to pay the respondents the sum of P400.00 a year from
of Exhibits, p. 23 and Exh. "A," Folder of Exhibits, p. 1). 1963 until possession is actually delivered because under the law, an owner of a
piece of land has no obligation to pay rentals as it owns and possesses the same.
On May 20, 1963, Respondent wrote the Mayor of Victorias regarding her discovery, demanding
payment of past rentals and requesting delivery of the area allegedly illegally occupied by Petitioner There is merit in the petition.
(Exh. "G, Folder of Exhibits, p. 15). When the Mayor replied that Petitioner bought the land she asked
It is undisputed that petitioner failed to present before the Court a Deed of Sale to prove its purchase Remarks.
of the land in question which is included in the Transfer Certificate of Title No. T-34546 in the name En Victorias, Neg. Occidental
of private respondent Norma Leuenberger.
Los annexes A. y B. estan unidos
The pivotal issue in this case is whether or not the secondary evidence presented by the petitioner
solamente en el original de la
municipality is sufficient to substantiate its claim that it acquired the disputed land by means of a
Deed of Sale. escritura.
Under the Best Evidence Rule when the original writing is lost or otherwise unavailable, the law in Respondent Court of Appeals was of the view (Rollo, p. 16) that a mere entry in the notarial register
point provides: of a notary public of an alleged sale cannot prove that a particular piece of land was sold by one
person to another, one of the important requirements being the indication of the area and the
Sec. 4. Secondary evidence when original is lost or destroyed. — When the original
technical description of the land being sold. In the present case, since no deed of sale could be
writing has been lost or destroyed, or cannot be produced in court, upon proof of
produced, there is no way of telling what particular portion of the property was sold to defendant
its execution and loss or destruction or unavailability, its contents may be proved
municipality and how big was the sale of the land conveyed to the defendant municipality.
by a copy, or by a recital of its contents in some authentic document, or by the
recollection of witnesses. (Rule 130, Rules of Court). It will be observed that the entries in the notarial register clearly show: (a) the nature of the
instrument. — a deed of sale; (b) the subject of the sale — two parcels of land, Lot Nos. 140-A and
In lieu of a Deed of Sale, petitioner presented a certificate issued by the Archives Division of the
140-B; (c) the parties of the contract — the vendor Simeona J. Vda. de Ditching in her capacity as
Bureau of Records Management in Manila, of a page of the 1934 Notarial Register of Vicente D.
Administrator in Civil Case No. 5116 of the Court of First Instance of Negros Occidental and the
Aragon with the following entries:
vendee, Vicente B. Ananosa, Municipal Mayor of Victorias; (d) the consideration P750.00; (e) the
Nature of Instrument — Compra venta 2 porciones Terrenos: Lotes Nos. 140-A y names of the witnesses Esteban Jalandoni and Gregoria Elizado; and the date of the sale on July 9,
140-B, Victorias, Neg. Occidental pago por esso despues aprobacion Jusgado la 1934.
Instance, Neg. Occidental causa civil 5116 Vendedora: — Simeona Jingco Vda. de
It is beyond question that the foregoing certificate is an authentic document clearly corroborated
Ditching . . . administradora Abint. G. Ditching
and supported by: (a) the testimony of the municipal councilor of Victorias, Ricardo Suarez, (Original
Comprador: — Municipio Victorias, Neg. Occidental . . . . por su Pres.Mpal Vicente TSN Hearing of September 14, 1964, pp. 1222) who negotiated the sale; (b) the testimony of Emilio
B. Arnaes Cuesta, (Original TSN Hearing of September 14, 1964, pp. 2238) the municipal treasurer of said
Valor: — P750.00 ... municipality, since 1932 up to the date of trial on September 14, 1964, who personally paid the
37
Vease copia correspondiente. amount of P750.00 to Felipe Leuenberger as consideration of the Contract of Sale; (c) Certificate of
Settlement (Original Exhibits, p. 20) "as evidence of said payment;" (d) Tax Declaration No. 429
Names of-persons Executing/ Acknowledging:
(Ibid., p. 22) which was cancelled and was substituted by Tax Declaration No. 3600 covering the
Simeona Vda. de Ditching portion of the property unsold (Decision, CFI, Neg. Occidental Orig. Record on Appeal, p. 6) and (e)
Adm. Abint actuacion especial No. 5116 Tax Declaration No. 3601 (Ibid, p. 23) in the name of the Municipal Government of Victorias covering
Jusgado la Instance Neg. Occidental the portion occupied as cemetery.

Vendedora Tax Declaration No. 3601 shows on its face the boundaries as follows:

Vicente B. Arnaes North — NE — Lot No. 140-C of the Subdivision

Pres. Municipal. Victorias South — SW — Lot No. 140-C of the Subdivision

Comprador West — NW — Lots Nos. 140-C & 140-B of the Subdivision.

Witnesses to the Signatures: The area is 33,747 sq.m.

Esteban Jalandoni At the back Exh. 4-A, the sale of a portion of the lot to the Municipality of Victorias was clearly
explained as follows:
Gregorio Elizalde
Note: The whole Lot No. 140, belongs to Norma Leuenberger as evidenced by a
Date: Month Transfer of Cert. of Title No. 18672. Portion of this Lot, (30,000 sq.m. was sold to
9 Julio 1934 Municipality of Victories for Cemetery Site as evidenced by a Deed of Sale executed
Fees: P2.00 by Simeona Jingco Vda. de Ditching in favor of the aforesaid Municipality and
ratified by Notary Public Mr. Vicente Aragon under Doc. No. 132; Page No. 2; Book
Cedulas:
No. 10, Series of 1934.
Exenta por susexo
At the lowest portion under Memoranda it was explained that —
F1027880 Enero 26/34 Victories, Neg. Occidental
The area under this declaration includes 3,746 sq. meters donated by Mrs. Unfortunately, the purchaser Municipality of Victorias failed to register said Deed of Sale; hence,
Simeona Jingco Vda. de Ditching and used as road leading to the cemetery. " (EXIL when Simeona Jingco Vda. de Ditching died, her grand-daughter, respondent Norma Leuenberger
4; Original Exhibits, p. 23). claimed to have inherited the land in dispute and succeeded in registering said land under the Torrens
The above-mentioned testimonies and documentary evidence sufficiently Identify the land sold by system. Said land is now covered by Transfer Certificate of Title No. T-34036 (Exhibit A, supra) issued
the predecessors-in-interest of private respondent. To insist on the technical description of the land by the Register of Deeds of -Negros Occidental on March 11, 1963 in the name of Norma
in dispute would be to sacrifice substance to form which would undoubtedly result in manifest Leuenberger, married to Francisco Soliva, containing an area of 208,157 square meters. As registered
injustice to the petitioner. owner, she is unquestionably entitled to the protection afforded to a holder of a Torrens Title.
Moreover, it is expressly provided by law that the thing sold shall be understood as delivered, when Admittedly, it is well-settled that under the Torrens System "Every person receiving a certificate of
it is placed in the control and possession of the vendee. (Civil Code Art. 1497). Where there is no title in pursuance of a decree of registration, . . . shall hold the same free of all encumbrance except
express provision that title shall not pass until payment of the price, and the thing gold has been those noted on said certificate ... " (Sec. 39, Act 496; now Sec. 43, PD 1529).
delivered, title passes from the moment the thing sold is placed in the possession and control of the In the instant case, however, respondent Norma Leuenberger admitted that she inherited the land
buyer. (Kuenzle & Streiff vs. Watson & Co., 13 PhiL 26 [1909]). Delivery produces its natural effects covered by Transfer Certificate of Title No. T-34036 from her grandmother, who had already sold
in law, the principal and most important of which being the conveyance of ownership, without the land to the petitioner in 1934; hence, she merely stepped into the shoes of her grandmother and
prejudice to the right of the vendor to payment of the price. (Ocejo, Perez & Co. vs. International she cannot claim a better right than her predecessor-in-interest. When she applied for registration
Banking Corp., 37 PhiL 631 [1918]). of the disputed land, she had no legal right to do so as she had no ownership of the land since land
Similarly, when the sale is made through a public instrument, the execution thereof shall be registration is not a mode of acquiring ownership but only of confirming ownership of the land.
equivalent to the delivery of the thing which is the object of the contract, if from the deed, the (Grande, et al. vs. Court of Appeals, et al., 115 Phil. 521.)"The Torrens System was not established
contrary does not appear or cannot be clearly inferred. (Civil Code Art. 1498). The execution of the as a means for the acquisition of title to private land, ..." It is intended merely to confirm and register
public instrument operates as a formal or symbolic delivery of the property sold and authorizes the the title which one may already have on the land. Where the applicant possesses no title or ownership
buyer to use the document as proof of ownership. (Florendo v. Foz, 20 PhiL 388 [1911]). over the parcel of land, he cannot acquire one under the Torrens system of Registration. (Torela, et
al., vs. Torela, et al., L-27843, October 11, 1979).
In the case at bar it is undisputed that petitioner had been in open, public, adverse and continuous
possession of the land for a period of more than thirty years. In fact, according to the municipal While an inherently defective Torrens title may not ordinarily be cancelled even after proof of its
treasurer there are over 1000 graves in the cemetery. (Decision, Court of Appeals, Rollo, pp. 11-22). defect, the law nevertheless safeguards the rightful party's interest in the titled land from fraud and
improper use of technicalities by snowing such party, in appropriate cases, to judicially seek 38
As correctly observed by Justice Magno S. Gatmaitan in his dissenting opinion (Rollo, pp. 23-28) in
reconveyance to him of whatever he has been deprived of as long as the land has not been
the decision of this case by the Court of Appeals, the evidence establishes without debate that the
transferred or conveyed to a purchaser in good faith. (Pedro Pascua, et al., vs. Mariano Gopuyoc et
property was originally registered in 1916. Plaintiff was born only in 1928 and cannot possibly be the
al., L-23197, May 31, 1977.)
registered owner of the original lot 140 at the time. Indeed, according to her own evidence, (Exhibit
A; Original Record pp. 13) she became the registered owner only in 1963. Likewise, it is undisputed The Civil Code provides:
that in the intestate estate of Gonzalo Ditching, the grandfather of private respondent Norma Art. 1456. If the property is acquired through mistake or fraud, the person
Leunberger, it was her grandmother, Simeona, the surviving spouse of Gonzalo who was named obtaining it is, by force of law, considered a trustee of an implied trust for the
judicial administratrix. According to Norma's own testimony, Isabel her mother, died in 1928 (TSN benefit of the person from whom the property comes.
Aug. 12, 1964, p. 34) while Simeona the grandmother died in 1942. ( Ibid.) Therefore, as of 1934 Thus, it has been held that where the land is decreed in the name of a person through fraud or
when a document of sale was executed by Simeona in favor of the municipality of Victories as mistake, such person is by operation of law considered a trustee of an implied trust for the benefit
indubitably shown in the notarial register (Exhibit 5.A) in question, Simeona was still the of the persons from whom the property comes. The beneficiary shag have the right t• enforce the
administratrix of the properties left by her husband, Gonzalo and of their conjugal partnership. trust, notwithstanding the irrevocability of the Torrens title and the trustee and his successors-in-
Consequently, she is the only person who could legally dispose of by sale this particular four- hectare interest are bound to execute the deed of reconveyance. (Pacheco vs. Arro, 85 Phil. 505; Escobar
portion of Lot 140. And so it is, that in 1934, Simeona Ditching in her capacity as judicial vs. Locsin, 74 Phil. 86).
administratrix made and executed the document described in the Report as Lots 140-A and 140-B,
As the land in dispute is held by private respondents in trust for the Municipality of Victorias, it is
showing clearly that they are portions of the original big Lot 140. As this conveyance was executed
logical to conclude that the latter can neither be deprived of its possession nor be made to pay
by the judicial administratrix, unquestionably the party authorized to dispose of the same, the
rentals thereof. Private respondent is in equity bound to reconvey the subject land to the cestui que
presumption must be that she did so upon proper authority of the Court of First Instance.
trust the Municipality of Victorias. The Torrens system was never calculated to foment betrayal in
As to the description of the property sold, the fact that a notarial report shows that they are portions the performance of a trust. (Escobar vs. Locsin, 74 Phil. 86).
of Lot 140 and the property in question occupied by the public cemetery is admittedly a portion of
For a more expeditious disposition of the case at bar, Rule 39 of the Rules of Court provides:
said lot in the absence of evidence that there were other portions of Lot 140 ceded unto the petitioner
municipality, the inevitable conclusion is that the sale executed in the Notarial Register refers to the SEC. 10. Judgment for Specific acts; vesting title. — ... If real or personal property
disputed lot. is within the Philippines, the court in lieu of directing a conveyance thereof may
enter judgment divesting the title of any party and vesting it in others and such
judgment shall have the force and effect of a conveyance executed in due form of
law.
Finally, the conclusions and findings of fact by the trial court are entitled to great weight on appeal
and should not be disturbed unless for strong and cogent reasons because the trial court is in a
better position to examine real evidence, as well as to observe the demeanor of the witnesses while
testifying in the case. (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]).
PREMISES CONSIDERED, the judgment of the respondent appellate court is hereby SET ASIDE and
the decision of the Court of First Instance of Negros Occidental, Branch I-Silay City in Civil Case No.
181-S declaring the cemetery site (Exh. E-2) on Lot No. 76 in Victories as the property of the
municipality of Victorias, is hereby REINSTATED. Additionally, We hereby order (a) the petitioner to
have the disputed land segregated by a licensed surveyor from the rest of Lot No. 76 described in
Transfer Certificate of Title No. T-34036 and to have the corresponding subdivision plan, duly
approved by the Land Registration Commission, submitted to the court of origin for approval; (b) the
private respondents Norma Leuenberger and Francisco Soliva to be divested of their title to the
disputed land under Rule 39, Sec. 10, Rules of Court; and (c) the Register of Deeds of Negros
Occidental to cancel Transfer Certificate of Title No. 34036 and issue, in lieu thereof, one title in the
name of the Municipality of Victories for the disputed land and another title in the names of the
private respondents Norma Leuenberger and Francisco Soliva for the rest of Lot No. 76. Without
costs.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin, and Cortes, JJ., concur.
39
Republic of the Philippines On January 8, 1990, petitioners filed a Petition to Remove Cloud on or Quiet Title to Real Property
SUPREME COURT asserting ownership of the disputed property.
Manila On May 11, 1993, the RTC rendered judgment in favor of petitioners upholding the latter’s superior
FIRST DIVISION right over the disputed property in view of the registration of the Affidavit of Adverse Claim prior to
the Certificate of Sale annotated in favor of respondents. Dispositively the decision reads:
SPS. JESUS CHING AND LEE POE TIN, G.R. No. 156076
WHEREFORE, premises, the above-entitled petition is granted for being preponderantly meritorious.
Petitioners, Present: Judgment is hereby rendered ordering:
- versus - PUNO, C.J., Chairperson, 1) The Register of Deeds of Las Piñas, Metro Manila to cancel all the annotations of encumbrances
SPS. ADOLFO & ARSENIA ENRILE, CORONA, in favor of defendants [respondents] in Transfer Certificate of Title No. 83618 issued by the Register
Respondents. CARPIO MORALES*, of Deeds of Pasay City, Metro Manila, District IV;
AZCUNA, and 2) Defendants [respondents] to pay plaintiffs [petitioners] in the sum of P 10,000.00 as
compensatory damages by way of litigation expenses;
LEONARDO-DE CASTRO, JJ.
3) To pay to plaintiffs [petitioners] the sum of P 10,000.00 as attorney’s fees; and,
Promulgated:
4) To pay the cost of the proceedings.
September 17, 2008
SO ORDERED.
x------------------------------------------------------------------------------------------x
In time, respondents appealed to the CA, principally arguing that the RTC committed reversible
DECISION error in ruling that petitioners had a better right over the disputed property. Respondents theorized
LEONARDO-DE CASTRO, J.: that the prior conveyance of the disputed property made by La Fuente to petitioners being a
Assailed in the instant petition for review on certiorari are the Decision1 of the Court of Appeals (CA) voluntary dealing with a registered land, mere registration of their adverse claim was insufficient.
dated August 29, 2002 in CA-G R. CV No. 42985 and the Resolution2 dated November 21, 2002 To respondents, in order to have petitioners’ interest protected, they should have registered the
denying petitioners’ motion for reconsideration. Deed of Absolute Sale with the Register of Deeds pursuant to Section 51 of PD 1529 and not merely
register an adverse claim under Section 70 of the same law. Citing the second paragraph of Section 40
The assailed CA decision reversed the decision of the Regional Trial Court (RTC) of Makati City, 70 which provides that an adverse claim shall be effective for a period of thirty days from the date
Branch 135, in Civil Case No. 90-064, an action for quieting of title thereat commenced by petitioner of registration, respondents insisted that the annotated Adverse Claim of petitioners had already
spouses Jesus Ching and Lee Poe Tin against respondent spouses Adolfo and Arsenia Enrile. expired, hence, it offered no protection when respondents acquired the disputed property through
The antecedent facts follow. execution sale.
On September 5, 1985, petitioners purchased from a certain Raymunda La Fuente a 370-square On August 29, 2002, the CA rendered the herein challenged decision reversing that of the RTC.
meter lot located at Barrio Tungtong, Las Piñas and covered by TCT No. 83618. La Fuente delivered Even as the CA viewed the prior sale of the disputed lot in favor of petitioners as perfected and
to petitioners a duly notarized Deed of Absolute Sale3 with the Owner’s Duplicate Certificate of Title consummated, it nonetheless upheld respondents’ preferential right over the disputed property.
and thereafter, petitioners took physical possession of the subject property. Finding merit in respondents’ arguments, the CA ruled:
For reasons known only to petitioners, the conveyance was not registered in the Register of Deeds This Court, also believes that there is truth in defendants-appellants’ assertion that while the sale
as prescribed by Section 51 of PD 15294 . Instead, on November 20, 1986, petitioners executed an is perfected and consummated, plaintiffs-appellees failed to diligently protect their interests by
Affidavit of Adverse Claim which was recorded and annotated at the back of TCT No. 83618 reflected failing to register the conveyance or transaction in the office of Register of Deeds. An owner of a
in the Memorandum of Encumbrances under Entry No. 86-62262.5 registered land is vested by law with rights and obligations and thus exercises all attributes of
In the meantime, petitioners peacefully and continuously possessed the subject property. ownership. These attributes include among others the right to dispose the real property itself. The
owner of the land may convey, mortgage, lease or otherwise deal with the same in accordance with
On August 19, 1988 ─ three years after they purchased the disputed property, petitioners received
existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instrument as
a Notice of Levy on Attachment and Writ of Execution issued by the Regional Trial Court (RTC) of
are sufficient in law. However, as clearly provided by Section 51 of Presidential Decree 1529, no
Pasig in favor of respondents, in Civil Case No. 54617 entitled Sps. Adolfo Enrile and Arsenia Enrile
deed, mortgage, lease or other voluntary instrument, except a will purporting to convey or affect
v. Raymunda La Fuente.
registered land shall take effect as a conveyance or bind the land, until the same has been registered
The Notice of Levy on Attachment was recorded at the dorsal portion of TCT No. 83618 under Entry in the office of the Register of Deeds. It shall operate only as a contract between the parties and
No. 3433-2 while the Writ of Execution was inscribed under Entry No. 3434-2. Also inscribed in the as evidence of authority to the Register of Deeds to effect registration. The act of registration shall
TCT is the Certificate of Sale dated January 26, 1989 covering the disputed property in favor of be the operative act to convey or affect the land insofar as third persons are concerned, and in all
respondents. cases under this Decree, the registration shall be made in the Office of the Register of Deeds of the
province or city where the land lies. Unless and until the subject transaction has been filed or
registered in the office of the Register of Deeds, the transaction shall only be binding on the parties SO ORDERED.
to the contract but not on the third person. The instrument is not thereby rendered void by failure Their motion for reconsideration having been denied by the CA in its challenged Resolution of
to register. Section 51 of PD 1529 states: November 21, 2002, petitioners are now before this Court, faulting the CA as follows:
Section 51. Conveyance and other dealings by registered owner – An owner of registered land may WITH DUE RESPECT, THE COURT A QUO GRAVELY ERRED AND ABUSED ITS DISCRETION WHEN
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. IT RENDERED SUBJECT DECISION AND RESOLUTION IN A WAY PROBABLY NOT IN ACCORD WITH
He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient LAW OR RULES WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT; Specifically, the
in law. But no deed, mortgage, lease or other voluntary instrument, except a will purporting to Court a quo erred;
convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate
a. When it held that the levy on attachment LATER annotated shall prevail over the Adverse Claim
only as a contract between the parties and as evidence of authority to the Register of Deeds to
EARLIER annotated at the back of the title by the mere lapse of 30 days and even without any
make registration.
petition in court for its cancellation;
The act of registration shall be the operative act to convey or affect the land insofar as third persons
b. When it did not dismiss the appeal considering that the question raised were questions of law
are concerned, and in all cases under this Decree, the registration shall be made in the office of the
and NO question of fact.8
Register of Deeds for the province or city where the land lies.
The petition is impressed with merit.
Laying the blame on petitioners, the CA added:
At the outset, the Court finds that the CA committed reversible error when it ruled that the
The law provides protection to third person, who believing in good faith and relying on the sweet
annotated adverse claim had already prescribed by the mere lapse of 30 days from its registration.
representations of some evil minded persons, may be unjustifiably inveigled to enter into a contract
The issue is no longer of first impression. In the 1996 case of Sajonas v. Court of Appeals, 9 we
or transaction not knowing that the subject real property has been encumbered or sold. It is the
explained that a notice of adverse claim remains valid even after the lapse of the 30-day period
duty of the buyer or vendee to register the transaction before the Register of Deeds of the province
provided by Section 70 of PD 1529. Section 70 provides:
or city where the property lies. The registration is intended to inform any minded individual that the
property has been subjected to a prior transaction and that entering into any further contract Whoever claims any part or interest in registered land adverse to the registered owner, arising
involving the same property shall be at his own risk. In the event that any third person was bona subsequent to the date of the original registration, may, if no other provision is made in this Decree
fide tricked to enter into any transaction involving the same property because the transferee or for registering the same, make a statement in writing, setting forth fully his alleged right or interest,
vendee failed to register the same as required by law, the latter’s interests should be subordinated and how or under whom acquired, a reference to the number of the certificate of title of the 41
to that of the third party. Axiomatic is the rule in this jurisdiction that when loss or damage was registered owner, and a description of the land in which the right or interest is claimed.
caused to two individuals who both acted in good faith but one is negligent, the loss or damage The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and
shall fall upon the one who acted negligently. a place at which all notices may be served upon him. This statement shall be entitled to registration
Citing a myriad of jurisprudence6 , the CA declared that respondents, as attaching creditors who as an adverse claim on the certificate of title. The adverse claim shall be effective for a period of
registered the order of attachment and the sale of the property to them as the highest bidders, thirty days from the date of registration. After the lapse of said period, the annotation of adverse
acquired a valid title to the disputed property as against petitioners who had previously bought the claim may be cancelled upon filing of a verified petition therefor by the party in interest. Provided,
same property from the registered owner but failed to register their deed of sale. however that after cancellation, no second adverse claim based on the same ground shall be
registered by the same claimant.
The CA further declared respondents as purchasers in good faith. On the premise that petitioners’
filing of the Affidavit of Adverse Claim was procedurally flawed and that the annotated adverse In the same case, we held that for as long as there is yet no petition for its cancellation, the notice
claim had already prescribed on December 20, 1986 after the lapse of 30 days from its registration of adverse claim remains subsisting: Thus:
which was November 20, 1986, the CA ruled that it cannot be considered sufficient notice to third At first blush, the provision in question would seem to restrict the effectivity of the adverse claim
person like the respondents who were not aware of the sale of the disputed lot to petitioners prior to thirty days. But the above provision cannot and should not be treated separately, but should be
to the levy on attachment. read in relation to the sentence following, which reads:
As stated at the threshold hereof, the CA, in its decision7 of August 29, 2002, reversed and set aside After the lapse of said period, the annotation of the adverse claim may be cancelled upon filing of
that of the RTC, thus: a verified petition therefor by the party in interest.
WHEREFORE, in view of the foregoing, the Decision dated May 11, 1993 of the Regional Trial Court, If the rationale of the law was for the adverse claim to ipso facto lose force and effect after the
National Capital Judicial Region, Branch 135, Makati City in Civil Case No. 90-064 is hereby lapse of thirty days, then it would not have been necessary to include the foregoing caveat to clarify
REVERSED. and complete the rule. For then, no adverse claim need be cancelled. If it has been automatically
The Register of Deeds of Las Piñas, Metro Manila is hereby mandated not to cancel any annotations terminated by mere lapse of time, the law would not have required the party in interest to do a
of encumbrances in favor of defendants-appellants in Transfer Certificate of Title No. 83618 issued useless act.10
by the Register of Deeds of Pasay City, Metro Manila, Dist. IV. In a petition for cancellation of adverse claim, a hearing must first be conducted. The hearing will
Who among the parties has a preferential right over the disputed property. afford the parties an opportunity to prove the propriety or impropriety of the adverse claim. 11
Now, as we see it, the recourse will either rise or fall on the decisive question of whether or not The law does not require a person dealing with the owner of registered land to go beyond the
respondents were purchasers in good faith when they acquired the disputed lot despite the certificate of title as he may rely on the notices of the encumbrances on the property annotated on
annotated adverse claim on their title. the certificate of title or absence of any annotation. Here, petitioners’ adverse claim is annotated at
We rule and so hold that they were not. the back of the title coupled with the fact that they are in possession of the disputed property. To
us, these circumstances should have put respondents on guard and required them to ascertain the
The Court has invariably ruled that in case of conflict between a vendee and an attaching creditor,
property being offered to them has already been sold to another to prevent injury to prior innocent
an attaching creditor who registers the order of attachment and the sale of the property to him as
buyers. A person who deliberately ignores a significant fact which would create suspicion in an
the highest bidder acquires a valid title to the property as against a vendee who had previously
otherwise reasonable man is not an innocent purchaser for value. It is a well-settled rule that a
bought the same property from the same owner but who failed to register his deed of sale. This is
purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and
because registration is the operative act that binds or affects the land insofar as third persons are
then claim that he acted in good faith under the belief that there was no defect in the title of the
concerned. It is upon registration that there is notice to the whole world. But where a party has
vendor.20
knowledge of a prior existing interest, as here, which is unregistered at the time he acquired a right
to the same land, his knowledge of that prior unregistered interest has the effect of registration as As aptly observed by the RTC, regardless of the non-registration of the Deed of Absolute Sale to
to him.12 Knowledge of an unregistered sale is equivalent to registration.13 petitioners, nor the 30-day effectivity of the adverse claim under Section 70 of PD 1529, respondents
were constructively notified of petitioners’ prior purchase of the disputed property. We quote with
The general rule is that a person dealing with registered land is not required to go behind the
approval the RTC’s observation on this matter, thus:
register to determine the condition of the property. In that case, such person is charged with notice
of the burden on the property which is noted on the face of the register or certificate of title.14 xxx In derogation to defendants claim that they have a better right over the questioned property
superior over that of the plaintiffs, the Court has only to carefully examine the face of TCT No.
Article 1544 of the Civil Code governs in cases of double sale. It provides:
83618 and its dorsal part on Memorandum of Encumbrances for entries and inscriptions in their
Should it be immovable property, the ownership shall belong to the person acquiring it who in good chronological order of dates of annotation of documents in the Office of the Register of Deeds. On
faith first recorded it in the Registry of Property. the title itself it is readily perceived and palpable that Entry No. 86-62262/T-83618 in reference to
Should there be no inscription, the ownership shall pertain to the person who in good faith was first the Adverse Claim executed by plaintiff Jesus Ching was registered way ahead on November 20,
in the possession; and, in the absence thereof, to the person who presents the oldest title, provided 1986 compared to Entries Nos. 3433-2, 3434-2 and 736-3, respectively the Notice of Levy, Writ of
there is good faith. Execution and Certificate of Sale in favor of spouses defendants Enrile which were duly registered
on August 19, 1988 (for the first two documents) and on March 21, 1989 (for the last document). 42
An "innocent purchaser for value" or any equivalent phrase shall be deemed to include, under the
Torrens System, the innocent lessee, mortgagee, and other encumbrancer for value.15 Perforce, before the registrations of the three documents purporting to be the rights and interests
of defendants in the property in question, the defendants more particularly and the whole world in
In Bautista v. Court of Appeals,16 we held that where the thing sold twice is an immovable, the one general were given constructive notice that Raymunda La Fuente, the judgment debtor in Civil Case
who acquires it and first registers it in the Registry of Property, in good faith, shall be the owner. No. 54617 of the Regional Trial Court of Pasig, has no more interest and rights to the property
Who then can be considered a purchaser in good faith? subject of litigation. Defendants should have at the first instance been duly warned and notified
In the early case of Leung Yee v. F.L. Strong Machinery Co. and Williamson, 17 the Court explained that the property involved in litigation subject to attachment and levy, execution and sale from
good faith in this wise: actual registration of the defendants’ documents referred herein. The annotation of inscription to
Entry No. 86-622/T-83618 is obviously and indeed very clear indicating that the plaintiffs’ registered
One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim
adverse claim in reference to the sale of the same property sought by defendants to be levied on
that he has acquired title thereto in good faith as against the true owner of the land or of an interest
attachment, final execution and sale came ahead.21
therein; and the same rule must be applied to one who has knowledge of facts which should have
put him upon such inquiry and investigation as might be necessary to acquaint him with the defects Hence, the particular circumstances of this case constrain us to rule that respondents were not
in the title of his vendor.18 purchasers in good faith and, as such, could not acquire good title to the property as against the
former transferee.
Good faith, or the want of it, is capable of being ascertained only from the acts of one claiming its
presence, for it is a condition of the mind which can only be judged by actual or fancied token or WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals promulgated on August
signs.19 29, 2002, in CA-G R. CV No. 42985, and the Resolution dated November 21, 2002 are hereby
REVERSED and SET ASIDE. In lieu thereof, the decision of the Regional Trial Court, of Makati City
It is beyond dispute that the property in question had already been sold by La Fuente to petitioners
Branch 135, dated May 11, 1993, in Civil Case No. 90-064 is REVIVED and AFFIRMED in toto.
on September 5, 1985. Petitioners immediately took possession thereof. When the Notice of Levy
on Attachment was recorded at the dorsal portion of TCT No. 83618 and when the Writ of Execution No costs.
and Certificate of Sale were inscribed under Entry No. 3434-2 in favor of respondents, on January SO ORDERED.
26, 1989, petitioners have been, since September 5, 1985, in actual, physical, continuous and
uninterrupted possession.